Correlation Between Shinhan Financial and Brembo SpA
Can any of the company-specific risk be diversified away by investing in both Shinhan Financial and Brembo SpA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Shinhan Financial and Brembo SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shinhan Financial Group and Brembo SpA, you can compare the effects of market volatilities on Shinhan Financial and Brembo SpA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Shinhan Financial with a short position of Brembo SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and Brembo SpA.
Diversification Opportunities for Shinhan Financial and Brembo SpA
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shinhan and Brembo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Brembo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brembo SpA and Shinhan Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Shinhan Financial Group are associated (or correlated) with Brembo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brembo SpA has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Brembo SpA go up and down completely randomly.
Pair Corralation between Shinhan Financial and Brembo SpA
Considering the 90-day investment horizon Shinhan Financial Group is expected to generate 0.58 times more return on investment than Brembo SpA. However, Shinhan Financial Group is 1.71 times less risky than Brembo SpA. It trades about 0.06 of its potential returns per unit of risk. Brembo SpA is currently generating about -0.21 per unit of risk. If you would invest 3,782 in Shinhan Financial Group on September 1, 2024 and sell it today you would earn a total of 76.00 from holding Shinhan Financial Group or generate 2.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Shinhan Financial Group vs. Brembo SpA
Performance |
| Timeline |
| Shinhan Financial |
| Brembo SpA |
Shinhan Financial and Brembo SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinhan Financial and Brembo SpA
The main advantage of trading using opposite Shinhan Financial and Brembo SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial position performs unexpectedly, Brembo SpA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Brembo SpA will offset losses from the drop in Brembo SpA's long position.| Shinhan Financial vs. Banco Santander Brasil | Shinhan Financial vs. CrossFirst Bankshares | Shinhan Financial vs. Banco Bradesco SA | Shinhan Financial vs. CF Bankshares |
| Brembo SpA vs. Allison Transmission Holdings | Brembo SpA vs. Luminar Technologies | Brembo SpA vs. Quantumscape Corp | Brembo SpA vs. Lear Corporation |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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