Correlation Between Shinhan WTI and Seohee Construction

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

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

Diversification Opportunities for Shinhan WTI and Seohee Construction

0.24

Correlation Coefficient

Shinhan WTI  Seohee Construction

Modest diversification

The 3 months correlation between Shinhan and Seohee is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and Seohee Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seohee Construction and Shinhan WTI 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 WTI Futures are associated (or correlated) with Seohee Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seohee Construction has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and Seohee Construction go up and down completely randomly.

Pair Corralation between Shinhan WTI and Seohee Construction

Assuming the 90 days trading horizon Shinhan WTI is expected to generate 12.04 times less return on investment than Seohee Construction. But when comparing it to its historical volatility, Shinhan WTI Futures is 1.95 times less risky than Seohee Construction. It trades about 0.05 of its potential returns per unit of risk. Seohee Construction Co is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  141,500  in Seohee Construction Co on September 27, 2024 and sell it today you would earn a total of  24,500  from holding Seohee Construction Co or generate 17.31% return on investment over 90 days.

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

Shinhan WTI Futures  vs.  Seohee Construction Co

Shinhan WTI Futures

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan WTI Futures are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinhan WTI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Seohee Construction

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seohee Construction Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seohee Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shinhan WTI and Seohee Construction

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

The idea behind Shinhan WTI Futures and Seohee Construction Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.