Correlation Between INSUN Environmental and Woori Financial

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

By analyzing existing cross correlation between INSUN Environmental New and Woori Financial Group, you can compare the effects of market volatilities on INSUN Environmental and Woori Financial 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 INSUN Environmental with a short position of Woori Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of INSUN Environmental and Woori Financial.

Diversification Opportunities for INSUN Environmental and Woori Financial

-0.31

Correlation Coefficient

INSUN Environmental  Woori Financial

Very good diversification

The 3 months correlation between INSUN and Woori is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding INSUN Environmental New and Woori Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Financial Group and INSUN Environmental 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 INSUN Environmental New are associated (or correlated) with Woori Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woori Financial Group has no effect on the direction of INSUN Environmental i.e., INSUN Environmental and Woori Financial go up and down completely randomly.

Pair Corralation between INSUN Environmental and Woori Financial

Assuming the 90 days trading horizon INSUN Environmental New is expected to under-perform the Woori Financial. In addition to that, INSUN Environmental is 1.03 times more volatile than Woori Financial Group. It trades about -0.11 of its total potential returns per unit of risk. Woori Financial Group is currently generating about 0.14 per unit of volatility. If you would invest  1,513,812  in Woori Financial Group on December 24, 2024 and sell it today you would earn a total of  165,188  from holding Woori Financial Group or generate 10.91% return on investment over 90 days.

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

INSUN Environmental New  vs.  Woori Financial Group

INSUN Environmental New

Risk-Adjusted Performance

Very Weak

Over the last 90 days INSUN Environmental New 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 Financial Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Woori Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with INSUN Environmental and Woori Financial

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

The idea behind INSUN Environmental New and Woori Financial Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.