Correlation Between Shinhan Financial and Daishin Balance

Can any of the company-specific risk be diversified away by investing in both Shinhan Financial and Daishin Balance 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 Daishin Balance 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 Daishin Balance 1, you can compare the effects of market volatilities on Shinhan Financial and Daishin Balance 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 Daishin Balance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and Daishin Balance.

Diversification Opportunities for Shinhan Financial and Daishin Balance

0.26

Correlation Coefficient

Shinhan Financial  Daishin Balance

Modest diversification

The 3 months correlation between Shinhan and Daishin is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Daishin Balance 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daishin Balance 1 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 Daishin Balance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daishin Balance 1 has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Daishin Balance go up and down completely randomly.

Pair Corralation between Shinhan Financial and Daishin Balance

Assuming the 90 days trading horizon Shinhan Financial Group is expected to under-perform the Daishin Balance. In addition to that, Shinhan Financial is 1.01 times more volatile than Daishin Balance 1. It trades about -0.07 of its total potential returns per unit of risk. Daishin Balance 1 is currently generating about -0.04 per unit of volatility. If you would invest  543,000  in Daishin Balance 1 on September 23, 2024 and sell it today you would lose (47,000) from holding Daishin Balance 1 or give up 8.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Shinhan Financial Group  vs.  Daishin Balance 1

Shinhan Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinhan Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Daishin Balance 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daishin Balance 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shinhan Financial and Daishin Balance

The main advantage of trading using opposite Shinhan Financial and Daishin Balance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial position performs unexpectedly, Daishin Balance 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 Daishin Balance will offset losses from the drop in Daishin Balance's long position.

The idea behind Shinhan Financial Group and Daishin Balance 1 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.