Correlation Between Shinhan WTI and ENERGYMACHINERY KOREA

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

Diversification Opportunities for Shinhan WTI and ENERGYMACHINERY KOREA

0.24

Correlation Coefficient

Shinhan WTI  ENERGYMACHINERY KOREA

Modest diversification

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

Pair Corralation between Shinhan WTI and ENERGYMACHINERY KOREA

Assuming the 90 days trading horizon Shinhan WTI is expected to generate 10.31 times less return on investment than ENERGYMACHINERY KOREA. But when comparing it to its historical volatility, Shinhan WTI Futures is 1.84 times less risky than ENERGYMACHINERY KOREA. It trades about 0.01 of its potential returns per unit of risk. ENERGYMACHINERY KOREA CoLtd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  210,500  in ENERGYMACHINERY KOREA CoLtd on September 25, 2024 and sell it today you would earn a total of  23,500  from holding ENERGYMACHINERY KOREA CoLtd or generate 11.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Shinhan WTI Futures  vs.  ENERGYMACHINERY KOREA CoLtd

Shinhan WTI Futures

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Shinhan WTI Futures has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ENERGYMACHINERY KOREA CoLtd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ENERGYMACHINERY KOREA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan WTI and ENERGYMACHINERY KOREA

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

The idea behind Shinhan WTI Futures and ENERGYMACHINERY KOREA CoLtd 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.