Correlation Between Daou Data and Woori Technology

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

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

Diversification Opportunities for Daou Data and Woori Technology

0.69

Correlation Coefficient

Daou Data  Woori Technology

Poor diversification

The 3 months correlation between Daou and Woori is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Daou Data Corp and Woori Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology and Daou Data 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 Daou Data Corp 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 has no effect on the direction of Daou Data i.e., Daou Data and Woori Technology go up and down completely randomly.

Pair Corralation between Daou Data and Woori Technology

Assuming the 90 days trading horizon Daou Data Corp is expected to under-perform the Woori Technology. But the stock apears to be less risky and, when comparing its historical volatility, Daou Data Corp is 1.94 times less risky than Woori Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Woori Technology is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  243,000  in Woori Technology on October 26, 2024 and sell it today you would lose (31,000) from holding Woori Technology or give up 12.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Daou Data Corp  vs.  Woori Technology

Daou Data Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daou Data Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Woori Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woori Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Daou Data and Woori Technology

The main advantage of trading using opposite Daou Data and Woori Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daou Data 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 Daou Data Corp and Woori Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.