Correlation Between Woori Technology and DHP Korea

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

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

Diversification Opportunities for Woori Technology and DHP Korea

0.35

Correlation Coefficient

Woori Technology  DHP Korea

Weak diversification

The 3 months correlation between Woori and DHP is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Woori Technology and DHP Korea Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHP Korea and Woori Technology 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 Woori Technology are associated (or correlated) with DHP Korea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHP Korea has no effect on the direction of Woori Technology i.e., Woori Technology and DHP Korea go up and down completely randomly.

Pair Corralation between Woori Technology and DHP Korea

Assuming the 90 days trading horizon Woori Technology is expected to generate 0.9 times more return on investment than DHP Korea. However, Woori Technology is 1.11 times less risky than DHP Korea. It trades about 0.1 of its potential returns per unit of risk. DHP Korea Co is currently generating about 0.04 per unit of risk. If you would invest  172,200  in Woori Technology on December 24, 2024 and sell it today you would earn a total of  23,300  from holding Woori Technology or generate 13.53% return on investment over 90 days.

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

Woori Technology  vs.  DHP Korea Co

Woori Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Woori Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

DHP Korea

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DHP Korea Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DHP Korea may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Woori Technology and DHP Korea

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

The idea behind Woori Technology and DHP Korea Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.