Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight">
<p><strong>In this insight, we provide an update of Kakao Bank </strong>which is getting ready to release its IPO prospectus in the coming days. Even without the prospectus, the company has already provided a lot of the the company's financials, industry analysis, and other materials in its annual and quarterly earnings filings. In this insight, we try to provide some of our key findings from its financial filings of Kakao Bank, but excluding the bankers' valuation assessment which is not yet available. </p>
<p>Kakao Bank is expected to be one of the largest IPOs in Korea in 2021. In the gray market, it is currently trading at 96,500 won per share or 39.5 trillion won. The two largest banks in Korea are <a href="https://www.smartkarma.com/entities/kb-financial-group-inc" target="_blank" data-smartkarma-citation="entities:718:1" rel="noopener">KB Financial (105560 KS)</a> and <a href="https://www.smartkarma.com/entities/shinhan-financial-group-ltd" target="_blank" data-smartkarma-citation="entities:6978:1" rel="noopener">Shinhan Financial (055550 KS),</a> which have market caps of 22.9 trillion won and 20.6 trillion won, respectively. As a result, Kakao Bank's market cap (in the gray market) is close to the combined market caps of KB Financial and Shinhan Financial (43.5 trillion won) which is quite remarkable. </p>
</div>


In this insight, we provide an update of Kakao Bank which is getting ready to release its IPO prospectus in the coming days. Even without the prospectus, the company has already provided a lot of the the company's financials, industry analysis, and other materials in its annual and quarterly earnings filings. In this insight, we try to provide some of our key findings from its financial filings of Kakao Bank, but excluding the bankers' valuation assessment which is not yet available. 
Kakao Bank is expected to be one of the largest IPOs in Korea in 2021. In the gray market, it is currently trading at 96,500 won per share or 39.5 trillion won. The two largest banks in Korea are KB Financial (105560 KS) and Shinhan Financial (055550 KS), which have market caps of 22.9 trillion won and 20.6 trillion won, respectively. As a result, Kakao Bank's market cap (in the gray market) is close to the combined market caps of KB Financial and Shinhan Financial (43.5 trillion won) which is quite remarkable. 


Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<p>The measures recommended by the financial authorities to pay dividends to banks within 20% of their net profit will likely end at the end of this month. Korea's financial holding companies will prepare for a semi-annual or quarterly dividend as soon as they pass a stress test (financial soundness assessment) to be implemented by the financial authorities soon.</p><p>In this connection, the attention is being on Shinhan Financial Group, which laid the groundwork for a quarterly dividend by amending the articles of incorporation at the general shareholders' meeting earlier this year. Accordingly, Shinhan Financial Group plans to review quarterly dividends at the earliest possible.</p>

The measures recommended by the financial authorities to pay dividends to banks within 20% of their net profit will likely end at the end of this month. Korea's financial holding companies will prepare for a semi-annual or quarterly dividend as soon as they pass a stress test (financial soundness assessment) to be implemented by the financial authorities soon.In this connection, the attention is being on Shinhan Financial Group, which laid the groundwork for a quarterly dividend by amending the articles of incorporation at the general shareholders' meeting earlier this year. Accordingly, Shinhan Financial Group plans to review quarterly dividends at the earliest possible.

Shinhan Financial Quarterly Dividends: Procedural Issues, Stress Test, & Payment Size

<p>Korea's financial regulators, the Financial Services Commission, had advised the local banks and bank holding companies to keep a dividend payout ratio below 20%. The purpose was clear. It was to secure a sufficient capital buffer to absorb potential losses resulting from COVID-19.</p><p>This recommendation for the 20% cap is effective until the end of this month.</p><p>The market widely expects the FSC to not renew this 20% dividend cap after this month amid the fast-rebounding economy.</p>

Korea's financial regulators, the Financial Services Commission, had advised the local banks and bank holding companies to keep a dividend payout ratio below 20%. The purpose was clear. It was to secure a sufficient capital buffer to absorb potential losses resulting from COVID-19.This recommendation for the 20% cap is effective until the end of this month.The market widely expects the FSC to not renew this 20% dividend cap after this month amid the fast-rebounding economy.

Korea Banks 20% Dividend Cap Scrapping: Projected Div Payout & Yield of 8 Bank Stocks

<p>Korea's local banks are still going strong as an inflation hedge stock. In particular, the sector leaders continue to shine the most, which is understandable.</p><p>Shinhan Financial Group has outperformed most of its local peers of late, causing a harsh diversion vs. several names.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="70">
<col width="70">
<col width="200">
<col width="70">
<col width="70">
<col width="70">
<col width="70">
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<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Comp 1 (long)"}'>Comp 1 (long)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Market cap"}'>Market cap</td>
<td data-sheets-value='{"1":2,"2":"Comp 2 (short)"}'>Comp 2 (short)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Market cap"}'>Market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"180-day correlation coefficient"}'>180-day correlation coefficient</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Sigma on a 20-day moving average"}'>Sigma on a 20-day moving average</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Woori Financial Group Inc"}'><strong>Woori Financial Group Inc</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":316140}'>316140</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7981.05789715}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩7,981.1B</td>
<td data-sheets-value='{"1":2,"2":"Shinhan Financial Group Co., Ltd."}'><strong>Shinhan Financial Group Co., Ltd.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"055550"}'>055550</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21826.3311565}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩21,826.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.9223855252672568}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'><strong>0.92</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1.7434864364413833}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'><strong>-1.74</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hana Financial Group Inc"}'><strong>Hana Financial Group Inc</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"086790"}'>086790</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13676.0259241}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩13,676.0B</td>
<td data-sheets-value='{"1":2,"2":"Shinhan Financial Group Co., Ltd."}'><strong>Shinhan Financial Group Co., Ltd.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"055550"}'>055550</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21826.3311565}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩21,826.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.9415706574402087}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'><strong>0.94</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1.6583215542673198}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'><strong>-1.66</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"KB Financial Group Inc"}'><strong>KB Financial Group Inc</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"105560"}'>105560</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":23701.05144}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩23,701.1B</td>
<td data-sheets-value='{"1":2,"2":"Shinhan Financial Group Co., Ltd."}'><strong>Shinhan Financial Group Co., Ltd.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"055550"}'>055550</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21826.3311565}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩21,826.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.9610188453950309}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'><strong>0.96</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1.5589371642688024}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'><strong>-1.56</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BNK Financial Group Inc"}'><strong>BNK Financial Group Inc</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"138930"}'>138930</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2591.1852057}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩2,591.2B</td>
<td data-sheets-value='{"1":2,"2":"Shinhan Financial Group Co., Ltd."}'><strong>Shinhan Financial Group Co., Ltd.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"055550"}'>055550</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":21826.3311565}' data-sheets-numberformat='[null,2,"₩#,##0.0B"]'>₩21,826.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.972704739094366}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'><strong>0.97</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1.0491776745143695}' data-sheets-numberformat='[null,2,"#,##0.00000",1]'><strong>-1.05</strong></td>
</tr>
<tr><td colspan="8">Source: KRX<strong><br></strong>
</td></tr>
</tbody>
</table><p>The harshest diversion at this point goes to Woori Financial Group. The current sigma is -1.74 on a 20-day moving average. Its price ratio relative to Shinhan is now 9.55% below the 180-day average. In fact, it is at a 180-day low.</p><table class="table table-striped">
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<col width="70">
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<col width="70">
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<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Price ratio"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]'>Price ratio</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"%Δ to 180-day mean"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]'>%Δ to 180-day mean</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"%Δ to 180-day high"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]'>%Δ to 180-day high</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"%Δ to 180-day low"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]'>%Δ to 180-day low</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Woori Financial Group Inc"}' data-sheets-formula="=R[-16]C[0]"><strong>Woori Financial Group Inc</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.09551050492215632}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]"><strong>-9.55%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.158687466379774}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]"><strong>-15.87%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]"><strong>0.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hana Financial Group Inc"}' data-sheets-formula="=R[-16]C[0]">Hana Financial Group Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.007327297625351524}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]">-0.73%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.10178905429741551}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]">-10.18%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.14368007113294015}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]">14.37%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"KB Financial Group Inc"}' data-sheets-formula="=R[-16]C[0]">KB Financial Group Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.022657232352227285}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]">-2.27%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.1009918086293668}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]">-10.10%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.08257600627747405}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]">8.26%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BNK Financial Group Inc"}' data-sheets-formula="=R[-16]C[0]">BNK Financial Group Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.037819100378221324}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]">3.78%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.048692073349346776}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]">-4.87%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.12800025002083512}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[0]C5-R[0]C[4])/R[0]C[4]">12.80%</td>
</tr>
<tr><td colspan="4">Source: KRX</td></tr>
</tbody>
</table><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/210/024/original/Woori+Financial+Group+Inc+vs.+Shinhan+Financial+Group+Co.%2C+Ltd.png?1622371064" class="editor-image img-responsive" data-smartkarma-image-id="210024"></figure></section>

Korea's local banks are still going strong as an inflation hedge stock. In particular, the sector leaders continue to shine the most, which is understandable.Shinhan Financial Group has outperformed most of its local peers of late, causing a harsh diversion vs. several names.












Comp 1 (long)
Ticker
Market cap
Comp 2 (short)
Ticker
Market cap
180-day correlation coefficient
Sigma on a 20-day moving average


Woori Financial Group Inc
316140
₩7,981.1B
Shinhan Financial Group Co., Ltd.
055550
₩21,826.3B
0.92
-1.74


Hana Financial Group Inc
086790
₩13,676.0B
Shinhan Financial Group Co., Ltd.
055550
₩21,826.3B
0.94
-1.66


KB Financial Group Inc
105560
₩23,701.1B
Shinhan Financial Group Co., Ltd.
055550
₩21,826.3B
0.96
-1.56


BNK Financial Group Inc
138930
₩2,591.2B
Shinhan Financial Group Co., Ltd.
055550
₩21,826.3B
0.97
-1.05

Source: KRX 


The harshest diversion at this point goes to Woori Financial Group. The current sigma is -1.74 on a 20-day moving average. Its price ratio relative to Shinhan is now 9.55% below the 180-day average. In fact, it is at a 180-day low.








Price ratio
%Δ to 180-day mean
%Δ to 180-day high
%Δ to 180-day low


Woori Financial Group Inc
-9.55%
-15.87%
0.00%


Hana Financial Group Inc
-0.73%
-10.18%
14.37%


KB Financial Group Inc
-2.27%
-10.10%
8.26%


BNK Financial Group Inc
3.78%
-4.87%
12.80%

Source: KRX



Korea Financials: Woori Vs. Shinhan Price Ratio at a 180-Day Low

<p>I track a total of 141 sector pairs in Korea. Starting this insight, I grouped them into three groups: 1. Financials, 2. Retail, and 3. Industrials.</p><hr><h2>Financials</h2><p>4 pairs from the Financials group have a 180-day correlation coefficient above 0.75 (or close) and a 180-day daily price return beta above 0.70 while sitting below -1.0σ on a 20-day moving average. Of these, <strong>Hana Financial/Shinhan Financial</strong> and <strong>Hyundai Marine/DB Insurance</strong> warrant attention.</p><table class="table table-striped">
<colgroup>
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<col width="200">
<col width="70">
<col width="70">
<col width="70">
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<tbody>
<tr>
<td style="width: 241.818px;" data-sheets-value='{"1":2,"2":"Comp 1 (Long)"}'>Comp 1 (Long)</td>
<td style="width: 190px;" data-sheets-value='{"1":2,"2":"Comp 2 (Short)"}'>Comp 2 (Short)</td>
<td style="text-align: right; width: 64.5455px;" data-sheets-value='{"1":2,"2":"Sigma on a 20-day moving average"}'>Sigma on a 20-day moving average</td>
<td style="text-align: right; width: 60.9091px;" data-sheets-value='{"1":2,"2":"180-day correlation coefficient"}'>180-day correlation coefficient</td>
<td style="text-align: right; width: 82.7273px;" data-sheets-value='{"1":2,"2":"Cointegration coefficient (180-day price Δ beta)"}'>Cointegration coefficient (180-day price Δ beta)</td>
</tr>
<tr>
<td style="width: 241.818px;" data-sheets-value='{"1":2,"2":"Mirae Asset Securities Co Ltd"}' data-sheets-formula="=Data!R[-1]C[1]">Mirae Asset Securities Co Ltd</td>
<td style="width: 190px;" data-sheets-value='{"1":2,"2":"Samsung Securities Co Ltd"}' data-sheets-formula="=Data!R[-1]C[1]">Samsung Securities Co Ltd</td>
<td style="text-align: right; width: 64.5455px;" data-sheets-value='{"1":3,"3":-1.222273476903716}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]">-1.22</td>
<td style="text-align: right; width: 60.9091px;" data-sheets-value='{"1":3,"3":0.7539862250329782}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[0]C[3]">0.75</td>
<td style="text-align: right; width: 82.7273px;" data-sheets-value='{"1":3,"3":0.6991098567863366}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[2]C[-3]">0.70</td>
</tr>
<tr>
<td style="width: 241.818px;" data-sheets-value='{"1":2,"2":"Mirae Asset Securities Co Ltd"}' data-sheets-formula="=Data!R[-2]C[3]">Mirae Asset Securities Co Ltd</td>
<td style="width: 190px;" data-sheets-value='{"1":2,"2":"NH Investment &amp; Securities Co Ltd"}' data-sheets-formula="=Data!R[-2]C[3]">NH Investment &amp; Securities Co Ltd</td>
<td style="text-align: right; width: 64.5455px;" data-sheets-value='{"1":3,"3":-1.1519173688233821}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]">-1.15</td>
<td style="text-align: right; width: 60.9091px;" data-sheets-value='{"1":3,"3":0.7418291376039101}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[2]C[3]">0.74</td>
<td style="text-align: right; width: 82.7273px;" data-sheets-value='{"1":3,"3":0.7031067314990199}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[1]C[3]">0.70</td>
</tr>
<tr>
<td style="width: 241.818px;" data-sheets-value='{"1":2,"2":"Hana Financial Group Inc"}' data-sheets-formula="=Data!R[-3]C[5]"><strong>Hana Financial Group Inc</strong></td>
<td style="width: 190px;" data-sheets-value='{"1":2,"2":"Shinhan Financial Group Co., Ltd."}' data-sheets-formula="=Data!R[-3]C[5]"><strong>Shinhan Financial Group Co., Ltd.</strong></td>
<td style="text-align: right; width: 64.5455px;" data-sheets-value='{"1":3,"3":-1.0788984328569544}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.08</strong></td>
<td style="text-align: right; width: 60.9091px;" data-sheets-value='{"1":3,"3":0.9401716746799647}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[2]C[3]"><strong>0.94</strong></td>
<td style="text-align: right; width: 82.7273px;" data-sheets-value='{"1":3,"3":1.021970873112603}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[0]C[5]"><strong>1.02</strong></td>
</tr>
<tr>
<td style="width: 241.818px;" data-sheets-value='{"1":2,"2":"Hyundai Marine &amp; Fire Insurance Co., Ltd"}' data-sheets-formula="=Data!R[-4]C[7]"><strong>Hyundai Marine &amp; Fire Insurance Co., Ltd</strong></td>
<td style="width: 190px;" data-sheets-value='{"1":2,"2":"DB Insurance Co Ltd"}' data-sheets-formula="=Data!R[-4]C[7]"><strong>DB Insurance Co Ltd</strong></td>
<td style="text-align: right; width: 64.5455px;" data-sheets-value='{"1":3,"3":-1.0725124068124459}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.07</strong></td>
<td style="text-align: right; width: 60.9091px;" data-sheets-value='{"1":3,"3":0.9161479896868121}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[2]C[3]"><strong>0.92</strong></td>
<td style="text-align: right; width: 82.7273px;" data-sheets-value='{"1":3,"3":0.756650231829711}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[-1]C[7]"><strong>0.76</strong></td>
</tr>
<tr><td colspan="5" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><h2>Retail</h2><p>2 pairs from the Retail group have a 180-day correlation coefficient above 0.75 and a 180-day daily price return beta above 0.70 while sitting below -1.0σ on a 20-day moving average: <strong>Lotte Shopping/GS Retail</strong> and <strong>Lotte Shopping/Hyundai Department</strong>.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Comp 1 (Long)"}'>Comp 1 (Long)</td>
<td data-sheets-value='{"1":2,"2":"Comp 2 (Short)"}'>Comp 2 (Short)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Sigma on a 20-day moving average"}'>Sigma on a 20-day moving average</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"180-day correlation coefficient"}'>180-day correlation coefficient</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Cointegration coefficient (180-day price Δ beta)"}'>Cointegration coefficient (180-day price Δ beta)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Lotte Shopping Co Ltd"}' data-sheets-formula="=Data!R[-1]C[1]"><strong>Lotte Shopping Co Ltd</strong></td>
<td data-sheets-value='{"1":2,"2":"GS Retail Co Ltd"}' data-sheets-formula="=Data!R[-1]C[1]"><strong>GS Retail Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1.5275880593828013}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.53</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8726370244086025}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[0]C[3]"><strong>0.87</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8778679151859091}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[2]C[-3]"><strong>0.88</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Lotte Shopping Co Ltd"}' data-sheets-formula="=Data!R[-3]C[5]"><strong>Lotte Shopping Co Ltd</strong></td>
<td data-sheets-value='{"1":2,"2":"Hyundai Department Store Co Ltd"}' data-sheets-formula="=Data!R[-3]C[5]"><strong>Hyundai Department Store Co Ltd</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1.126049210184334}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.13</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.9181905655104922}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[1]C[3]"><strong>0.92</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8654420144103113}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[0]C[3]"><strong>0.87</strong></td>
</tr>
<tr><td colspan="5" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><h2>Industrials</h2><p>4 pairs from the Retail group have a 180-day correlation coefficient above 0.75 and a 180-day daily price return beta above 0.70 (or close) while sitting below -1.0σ on a 20-day moving average.</p><p>Of these, the Celltrion siblings are the most correlated/cointegrated ones with a substantial diversion. I mentioned their trading dynamics in the previous insight. I will cover <strong>KAI/Hanwha Aerospace </strong>and <strong>Korea Shipbuilding/Hyundai Mipo</strong> in this post.</p><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
<col width="70">
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr>
<td style="width: 230px;" data-sheets-value='{"1":2,"2":"Comp 1 (Long)"}'>Comp 1 (Long)</td>
<td style="width: 194.545px;" data-sheets-value='{"1":2,"2":"Comp 2 (Short)"}'>Comp 2 (Short)</td>
<td style="text-align: right; width: 80px;" data-sheets-value='{"1":2,"2":"Sigma on a 20-day moving average"}'>Sigma on a 20-day moving average</td>
<td style="text-align: right; width: 58.1818px;" data-sheets-value='{"1":2,"2":"180-day correlation coefficient"}'>180-day correlation coefficient</td>
<td style="text-align: right; width: 77.2727px;" data-sheets-value='{"1":2,"2":"Cointegration coefficient (180-day price Δ beta)"}'>Cointegration coefficient (180-day price Δ beta)</td>
</tr>
<tr>
<td style="width: 230px;" data-sheets-value='{"1":2,"2":"Korea Aerospace Industries Ltd"}' data-sheets-formula="=Data!R[-1]C[1]"><strong>Korea Aerospace Industries Ltd</strong></td>
<td style="width: 194.545px;" data-sheets-value='{"1":2,"2":"Hanwha Aerospace Co Ltd"}' data-sheets-formula="=Data!R[-1]C[1]"><strong>Hanwha Aerospace Co Ltd</strong></td>
<td style="text-align: right; width: 80px;" data-sheets-value='{"1":3,"3":-1.2612782453636326}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.26</strong></td>
<td style="text-align: right; width: 58.1818px;" data-sheets-value='{"1":3,"3":0.9151301901660448}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[2]C[3]"><strong>0.92</strong></td>
<td style="text-align: right; width: 77.2727px;" data-sheets-value='{"1":3,"3":0.6164208180229479}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[2]C[1]"><strong>0.62</strong></td>
</tr>
<tr>
<td style="width: 230px;" data-sheets-value='{"1":2,"2":"Celltrion, Inc."}' data-sheets-formula="=Data!R[-2]C[3]">Celltrion, Inc.</td>
<td style="width: 194.545px;" data-sheets-value='{"1":2,"2":"Celltrion HealthCare Co Ltd"}' data-sheets-formula="=Data!R[-2]C[3]">Celltrion HealthCare Co Ltd</td>
<td style="text-align: right; width: 80px;" data-sheets-value='{"1":3,"3":-1.178153322167809}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]">-1.18</td>
<td style="text-align: right; width: 58.1818px;" data-sheets-value='{"1":3,"3":0.8365102631201596}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[2]C[3]">0.84</td>
<td style="text-align: right; width: 77.2727px;" data-sheets-value='{"1":3,"3":0.7643376618440517}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[1]C[3]">0.76</td>
</tr>
<tr>
<td style="width: 230px;" data-sheets-value='{"1":2,"2":"Celltrion Pharm Inc"}' data-sheets-formula="=Data!R[-3]C[5]">Celltrion Pharm Inc</td>
<td style="width: 194.545px;" data-sheets-value='{"1":2,"2":"Celltrion HealthCare Co Ltd"}' data-sheets-formula="=Data!R[-3]C[5]">Celltrion HealthCare Co Ltd</td>
<td style="text-align: right; width: 80px;" data-sheets-value='{"1":3,"3":-1.066075796850893}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]">-1.07</td>
<td style="text-align: right; width: 58.1818px;" data-sheets-value='{"1":3,"3":0.8799929165201812}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[3]C[3]">0.88</td>
<td style="text-align: right; width: 77.2727px;" data-sheets-value='{"1":3,"3":0.7823707069161424}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[0]C[7]">0.78</td>
</tr>
<tr>
<td style="width: 230px;" data-sheets-value='{"1":2,"2":"Korea Shipbuilding &amp;Offshore Engn Co Ltd"}' data-sheets-formula="=Data!R[-5]C[9]"><strong>Korea Shipbuilding &amp;Offshore Engn Co Ltd</strong></td>
<td style="width: 194.545px;" data-sheets-value='{"1":2,"2":"Hyundai Mipo Dockyard Co., Ltd."}' data-sheets-formula="=Data!R[-5]C[9]"><strong>Hyundai Mipo Dockyard Co., Ltd.</strong></td>
<td style="text-align: right; width: 80px;" data-sheets-value='{"1":3,"3":-1.0295619383635715}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=R[8]C[-1]"><strong>-1.03</strong></td>
<td style="text-align: right; width: 58.1818px;" data-sheets-value='{"1":3,"3":0.9657685058341984}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Sort!R[3]C[3]"><strong>0.97</strong></td>
<td style="text-align: right; width: 77.2727px;" data-sheets-value='{"1":3,"3":0.6811111503062213}' data-sheets-numberformat='[null,2,"#,##0.00",1]' data-sheets-formula="=Beta!R[-2]C[11]"><strong>0.68</strong></td>
</tr>
<tr><td colspan="5" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

I track a total of 141 sector pairs in Korea. Starting this insight, I grouped them into three groups: 1. Financials, 2. Retail, and 3. Industrials.Financials4 pairs from the Financials group have a 180-day correlation coefficient above 0.75 (or close) and a 180-day daily price return beta above 0.70 while sitting below -1.0σ on a 20-day moving average. Of these, Hana Financial/Shinhan Financial and Hyundai Marine/DB Insurance warrant attention.









Comp 1 (Long)
Comp 2 (Short)
Sigma on a 20-day moving average
180-day correlation coefficient
Cointegration coefficient (180-day price Δ beta)


Mirae Asset Securities Co Ltd
Samsung Securities Co Ltd
-1.22
0.75
0.70


Mirae Asset Securities Co Ltd
NH Investment &amp; Securities Co Ltd
-1.15
0.74
0.70


Hana Financial Group Inc
Shinhan Financial Group Co., Ltd.
-1.08
0.94
1.02


Hyundai Marine &amp; Fire Insurance Co., Ltd
DB Insurance Co Ltd
-1.07
0.92
0.76

Source: KRX

Retail2 pairs from the Retail group have a 180-day correlation coefficient above 0.75 and a 180-day daily price return beta above 0.70 while sitting below -1.0σ on a 20-day moving average: Lotte Shopping/GS Retail and Lotte Shopping/Hyundai Department.









Comp 1 (Long)
Comp 2 (Short)
Sigma on a 20-day moving average
180-day correlation coefficient
Cointegration coefficient (180-day price Δ beta)


Lotte Shopping Co Ltd
GS Retail Co Ltd
-1.53
0.87
0.88


Lotte Shopping Co Ltd
Hyundai Department Store Co Ltd
-1.13
0.92
0.87

Source: KRX

Industrials4 pairs from the Retail group have a 180-day correlation coefficient above 0.75 and a 180-day daily price return beta above 0.70 (or close) while sitting below -1.0σ on a 20-day moving average.Of these, the Celltrion siblings are the most correlated/cointegrated ones with a substantial diversion. I mentioned their trading dynamics in the previous insight. I will cover KAI/Hanwha Aerospace and Korea Shipbuilding/Hyundai Mipo in this post.









Comp 1 (Long)
Comp 2 (Short)
Sigma on a 20-day moving average
180-day correlation coefficient
Cointegration coefficient (180-day price Δ beta)


Korea Aerospace Industries Ltd
Hanwha Aerospace Co Ltd
-1.26
0.92
0.62


Celltrion, Inc.
Celltrion HealthCare Co Ltd
-1.18
0.84
0.76


Celltrion Pharm Inc
Celltrion HealthCare Co Ltd
-1.07
0.88
0.78


Korea Shipbuilding &amp;Offshore Engn Co Ltd
Hyundai Mipo Dockyard Co., Ltd.
-1.03
0.97
0.68

Source: KRX



Korea Sector Pair Trade: Financials, Retail, & Industrials

South Korea

Shinhan Financial Group Co., Ltd., a holding company, provides a full range of consumer and commercial banking-related financial services.  The company's main businesses include banking, securities brokerage, trust banking, and assets management to individuals, businesses, and other financial institutions.

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Shinhan Financial Group Adr (SHG US)

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