Correlation Between Shinhan WTI and RedcapTour

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

Diversification Opportunities for Shinhan WTI and RedcapTour

-0.19

Correlation Coefficient

Shinhan WTI  RedcapTour

Good diversification

The 3 months correlation between Shinhan and RedcapTour is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and RedcapTour Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RedcapTour 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 RedcapTour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RedcapTour has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and RedcapTour go up and down completely randomly.

Pair Corralation between Shinhan WTI and RedcapTour

Assuming the 90 days trading horizon Shinhan WTI is expected to generate 1.94 times less return on investment than RedcapTour. In addition to that, Shinhan WTI is 1.03 times more volatile than RedcapTour Co. It trades about 0.04 of its total potential returns per unit of risk. RedcapTour Co is currently generating about 0.08 per unit of volatility. If you would invest  794,500  in RedcapTour Co on September 29, 2024 and sell it today you would earn a total of  62,500  from holding RedcapTour Co or generate 7.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Shinhan WTI Futures  vs.  RedcapTour Co

Shinhan WTI Futures

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan WTI Futures are ranked lower than 3 (%) 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.

RedcapTour

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RedcapTour Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RedcapTour may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shinhan WTI and RedcapTour

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

The idea behind Shinhan WTI Futures and RedcapTour 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.