Correlation Between Woori Technology and Daehan Steel

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

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

Diversification Opportunities for Woori Technology and Daehan Steel

0.08

Correlation Coefficient

Woori Technology  Daehan Steel

Significant diversification

The 3 months correlation between Woori and Daehan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Woori Technology Investment and Daehan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daehan Steel 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 Investment are associated (or correlated) with Daehan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daehan Steel has no effect on the direction of Woori Technology i.e., Woori Technology and Daehan Steel go up and down completely randomly.

Pair Corralation between Woori Technology and Daehan Steel

Assuming the 90 days trading horizon Woori Technology is expected to generate 3.36 times less return on investment than Daehan Steel. In addition to that, Woori Technology is 2.47 times more volatile than Daehan Steel. It trades about 0.03 of its total potential returns per unit of risk. Daehan Steel is currently generating about 0.23 per unit of volatility. If you would invest  1,300,000  in Daehan Steel on October 1, 2024 and sell it today you would earn a total of  365,000  from holding Daehan Steel or generate 28.08% return on investment over 90 days.

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

Woori Technology Investment  vs.  Daehan Steel

Woori Technology Inv

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Technology Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Woori Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Daehan Steel

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Daehan Steel are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daehan Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woori Technology and Daehan Steel

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

The idea behind Woori Technology Investment and Daehan Steel 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.