Correlation Between Shinhan Financial and Commerzbank

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

Diversification Opportunities for Shinhan Financial and Commerzbank

-0.31

Correlation Coefficient

Shinhan Financial  Commerzbank

Very good diversification

The 3 months correlation between Shinhan and Commerzbank is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Commerzbank AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG PK 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 Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG PK has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Commerzbank go up and down completely randomly.

Pair Corralation between Shinhan Financial and Commerzbank

Considering the 90-day investment horizon Shinhan Financial is expected to generate 1.04 times less return on investment than Commerzbank. But when comparing it to its historical volatility, Shinhan Financial Group is 1.24 times less risky than Commerzbank. It trades about 0.16 of its potential returns per unit of risk. Commerzbank AG PK is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,446  in Commerzbank AG PK on February 1, 2025 and sell it today you would earn a total of  225.00  from holding Commerzbank AG PK or generate 9.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Shinhan Financial Group  vs.  Commerzbank AG PK

Shinhan Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Shinhan Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Commerzbank AG PK

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commerzbank AG PK are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Commerzbank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Financial and Commerzbank

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

The idea behind Shinhan Financial Group and Commerzbank AG PK 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.