Correlation Between NH Investment and Woori Technology

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

By analyzing existing cross correlation between NH Investment Securities and Woori Technology Investment, you can compare the effects of market volatilities on NH Investment and Woori Technology 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 NH Investment with a short position of Woori Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH Investment and Woori Technology.

Diversification Opportunities for NH Investment and Woori Technology

-0.4

Correlation Coefficient

NH Investment  Woori Technology

Very good diversification

The 3 months correlation between 005940 and Woori is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding NH Investment Securities and Woori Technology Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology Inv and NH Investment 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 NH Investment Securities are associated (or correlated) with Woori Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woori Technology Inv has no effect on the direction of NH Investment i.e., NH Investment and Woori Technology go up and down completely randomly.

Pair Corralation between NH Investment and Woori Technology

Assuming the 90 days trading horizon NH Investment is expected to generate 4.14 times less return on investment than Woori Technology. But when comparing it to its historical volatility, NH Investment Securities is 2.99 times less risky than Woori Technology. It trades about 0.01 of its potential returns per unit of risk. Woori Technology Investment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  827,000  in Woori Technology Investment on October 22, 2024 and sell it today you would lose (28,000) from holding Woori Technology Investment or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NH Investment Securities  vs.  Woori Technology Investment

NH Investment Securities

Risk-Adjusted Performance

0 of 100

Weak

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

Woori Technology Inv

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NH Investment and Woori Technology

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

The idea behind NH Investment Securities and Woori Technology Investment 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.