Correlation Between I-Components and Shinhan WTI

Can any of the company-specific risk be diversified away by investing in both I-Components and Shinhan WTI 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 I-Components and Shinhan WTI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between i Components Co and Shinhan WTI Futures, you can compare the effects of market volatilities on I-Components and Shinhan WTI 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 I-Components with a short position of Shinhan WTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of I-Components and Shinhan WTI.

Diversification Opportunities for I-Components and Shinhan WTI

0.38

Correlation Coefficient

I-Components  Shinhan WTI

Weak diversification

The 3 months correlation between I-Components and Shinhan is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding i Components Co and Shinhan WTI Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan WTI Futures and I-Components 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 i Components Co are associated (or correlated) with Shinhan WTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan WTI Futures has no effect on the direction of I-Components i.e., I-Components and Shinhan WTI go up and down completely randomly.

Pair Corralation between I-Components and Shinhan WTI

Assuming the 90 days trading horizon i Components Co is expected to generate 0.9 times more return on investment than Shinhan WTI. However, i Components Co is 1.11 times less risky than Shinhan WTI. It trades about 0.09 of its potential returns per unit of risk. Shinhan WTI Futures is currently generating about 0.03 per unit of risk. If you would invest  432,000  in i Components Co on September 14, 2024 and sell it today you would earn a total of  38,000  from holding i Components Co or generate 8.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.55%
Values	Daily Returns

i Components Co  vs.  Shinhan WTI Futures

i Components

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in i Components Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, I-Components may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shinhan WTI Futures

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan WTI Futures are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shinhan WTI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with I-Components and Shinhan WTI

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

The idea behind i Components Co and Shinhan WTI Futures 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.