Correlation Between Shinhan WTI and Dongkuk Structures

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

Diversification Opportunities for Shinhan WTI and Dongkuk Structures

0.16

Correlation Coefficient

Shinhan WTI  Dongkuk Structures

Average diversification

The 3 months correlation between Shinhan and Dongkuk is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and Dongkuk Structures Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongkuk Structures 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 Dongkuk Structures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongkuk Structures has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and Dongkuk Structures go up and down completely randomly.

Pair Corralation between Shinhan WTI and Dongkuk Structures

Assuming the 90 days trading horizon Shinhan WTI Futures is expected to under-perform the Dongkuk Structures. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan WTI Futures is 3.11 times less risky than Dongkuk Structures. The stock trades about -0.04 of its potential returns per unit of risk. The Dongkuk Structures Construction is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  219,500  in Dongkuk Structures Construction on September 23, 2024 and sell it today you would earn a total of  20,000  from holding Dongkuk Structures Construction or generate 9.11% return on investment over 90 days.

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

Shinhan WTI Futures  vs.  Dongkuk Structures Constructio

Shinhan WTI Futures

Risk-Adjusted Performance

0 of 100

Very 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.

Dongkuk Structures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongkuk Structures Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shinhan WTI and Dongkuk Structures

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

The idea behind Shinhan WTI Futures and Dongkuk Structures Construction 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.