Correlation Between Shinhan Financial and Reneo Pharmaceuticals

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

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

Diversification Opportunities for Shinhan Financial and Reneo Pharmaceuticals

-0.39

Correlation Coefficient

Shinhan Financial  Reneo Pharmaceuticals

Very good diversification

The 3 months correlation between Shinhan and Reneo is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Reneo Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reneo Pharmaceuticals and Shinhan Financial 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 Financial Group are associated (or correlated) with Reneo Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reneo Pharmaceuticals has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Reneo Pharmaceuticals go up and down completely randomly.

Pair Corralation between Shinhan Financial and Reneo Pharmaceuticals

Considering the 90-day investment horizon Shinhan Financial Group is expected to under-perform the Reneo Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Financial Group is 1.56 times less risky than Reneo Pharmaceuticals. The stock trades about -0.21 of its potential returns per unit of risk. The Reneo Pharmaceuticals is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  1,620  in Reneo Pharmaceuticals on September 26, 2024 and sell it today you would earn a total of  200.00  from holding Reneo Pharmaceuticals or generate 12.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	12.7%
Values	Daily Returns

Shinhan Financial Group  vs.  Reneo Pharmaceuticals

Shinhan Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinhan Financial Group 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 technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Reneo Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Excellent

Over the last 90 days Reneo Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unsteady technical indicators, Reneo Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Financial and Reneo Pharmaceuticals

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

The idea behind Shinhan Financial Group and Reneo Pharmaceuticals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.