Correlation Between Shinhan Inverse and Alphabet

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

By analyzing existing cross correlation between Shinhan Inverse WTI and Alphabet Inc Class A, you can compare the effects of market volatilities on Shinhan Inverse and Alphabet 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 Inverse with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Inverse and Alphabet.

Diversification Opportunities for Shinhan Inverse and Alphabet

-0.17

Correlation Coefficient

Shinhan Inverse  Alphabet

Good diversification

The 3 months correlation between Shinhan and Alphabet is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Inverse WTI and Alphabet Inc Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A and Shinhan Inverse 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 Inverse WTI are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of Shinhan Inverse i.e., Shinhan Inverse and Alphabet go up and down completely randomly.

Pair Corralation between Shinhan Inverse and Alphabet

Assuming the 90 days trading horizon Shinhan Inverse is expected to generate 4.88 times less return on investment than Alphabet. In addition to that, Shinhan Inverse is 1.15 times more volatile than Alphabet Inc Class A. It trades about 0.02 of its total potential returns per unit of risk. Alphabet Inc Class A is currently generating about 0.09 per unit of volatility. If you would invest  329,338  in Alphabet Inc Class A on September 14, 2024 and sell it today you would earn a total of  62,234  from holding Alphabet Inc Class A or generate 18.9% return on investment over 90 days.

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

Shinhan Inverse WTI  vs.  Alphabet Inc Class A

Shinhan Inverse WTI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinhan Inverse WTI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinhan Inverse is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alphabet Class A

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Alphabet displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Inverse and Alphabet

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

The idea behind Shinhan Inverse WTI and Alphabet Inc Class A 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.