Correlation Between Shinhan Financial and Community Heritage

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

Diversification Opportunities for Shinhan Financial and Community Heritage

-0.46

Correlation Coefficient

Shinhan Financial  Community Heritage

Very good diversification

The 3 months correlation between Shinhan and Community is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Community Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Heritage 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 Community Heritage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Heritage has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Community Heritage go up and down completely randomly.

Pair Corralation between Shinhan Financial and Community Heritage

Considering the 90-day investment horizon Shinhan Financial Group is expected to generate 5.89 times more return on investment than Community Heritage. However, Shinhan Financial is 5.89 times more volatile than Community Heritage Financial. It trades about 0.07 of its potential returns per unit of risk. Community Heritage Financial is currently generating about 0.01 per unit of risk. If you would invest  3,334  in Shinhan Financial Group on February 7, 2025 and sell it today you would earn a total of  268.00  from holding Shinhan Financial Group or generate 8.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Shinhan Financial Group  vs.  Community Heritage Financial

Shinhan Financial

Risk-Adjusted Performance

Modest

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

Community Heritage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community Heritage Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Community Heritage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Shinhan Financial and Community Heritage

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

The idea behind Shinhan Financial Group and Community Heritage Financial 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.