Correlation Between Daewoo SBI and Shinhan Financial

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

By analyzing existing cross correlation between Daewoo SBI SPAC and Shinhan Financial Group, you can compare the effects of market volatilities on Daewoo SBI and Shinhan Financial 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 Daewoo SBI with a short position of Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo SBI and Shinhan Financial.

Diversification Opportunities for Daewoo SBI and Shinhan Financial

0.38

Correlation Coefficient

Daewoo SBI  Shinhan Financial

Weak diversification

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

Pair Corralation between Daewoo SBI and Shinhan Financial

Assuming the 90 days trading horizon Daewoo SBI SPAC is expected to under-perform the Shinhan Financial. But the stock apears to be less risky and, when comparing its historical volatility, Daewoo SBI SPAC is 1.39 times less risky than Shinhan Financial. The stock trades about -0.05 of its potential returns per unit of risk. The Shinhan Financial Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,340,355  in Shinhan Financial Group on September 12, 2024 and sell it today you would lose (345,355) from holding Shinhan Financial Group or give up 6.47% of portfolio value over 90 days.

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

Daewoo SBI SPAC  vs.  Shinhan Financial Group

Daewoo SBI SPAC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daewoo SBI SPAC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daewoo SBI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 somewhat strong basic indicators, Shinhan Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daewoo SBI and Shinhan Financial

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

The idea behind Daewoo SBI SPAC and Shinhan Financial Group 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.