Correlation Between Settlebank and Shinhan Inverse

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

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

Diversification Opportunities for Settlebank and Shinhan Inverse

0.04

Correlation Coefficient

Settlebank  Shinhan Inverse

Significant diversification

The 3 months correlation between Settlebank and Shinhan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank and Shinhan Inverse WTI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Inverse WTI and Settlebank 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 Settlebank are associated (or correlated) with Shinhan Inverse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Inverse WTI has no effect on the direction of Settlebank i.e., Settlebank and Shinhan Inverse go up and down completely randomly.

Pair Corralation between Settlebank and Shinhan Inverse

Assuming the 90 days trading horizon Settlebank is expected to under-perform the Shinhan Inverse. In addition to that, Settlebank is 1.57 times more volatile than Shinhan Inverse WTI. It trades about -0.06 of its total potential returns per unit of risk. Shinhan Inverse WTI is currently generating about -0.01 per unit of volatility. If you would invest  282,000  in Shinhan Inverse WTI on September 16, 2024 and sell it today you would lose (7,000) from holding Shinhan Inverse WTI or give up 2.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Settlebank  vs.  Shinhan Inverse WTI

Settlebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Settlebank 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.

Shinhan Inverse WTI

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Settlebank and Shinhan Inverse

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

The idea behind Settlebank and Shinhan Inverse WTI 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.