Correlation Between Woorim Machinery and LIG ES

Can any of the company-specific risk be diversified away by investing in both Woorim Machinery and LIG ES 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 Woorim Machinery and LIG ES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Woorim Machinery Co and LIG ES SPAC, you can compare the effects of market volatilities on Woorim Machinery and LIG ES 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 Woorim Machinery with a short position of LIG ES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woorim Machinery and LIG ES.

Diversification Opportunities for Woorim Machinery and LIG ES

0.62

Correlation Coefficient

Woorim Machinery  LIG ES

Poor diversification

The 3 months correlation between Woorim and LIG is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Woorim Machinery Co and LIG ES SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIG ES SPAC and Woorim Machinery 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 Woorim Machinery Co are associated (or correlated) with LIG ES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIG ES SPAC has no effect on the direction of Woorim Machinery i.e., Woorim Machinery and LIG ES go up and down completely randomly.

Pair Corralation between Woorim Machinery and LIG ES

Assuming the 90 days trading horizon Woorim Machinery is expected to generate 1.84 times less return on investment than LIG ES. In addition to that, Woorim Machinery is 1.0 times more volatile than LIG ES SPAC. It trades about 0.09 of its total potential returns per unit of risk. LIG ES SPAC is currently generating about 0.17 per unit of volatility. If you would invest  434,000  in LIG ES SPAC on November 29, 2024 and sell it today you would earn a total of  40,000  from holding LIG ES SPAC or generate 9.22% return on investment over 90 days.

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

Woorim Machinery Co  vs.  LIG ES SPAC

Woorim Machinery

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Woorim Machinery Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Woorim Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

LIG ES SPAC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LIG ES SPAC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LIG ES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woorim Machinery and LIG ES

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

The idea behind Woorim Machinery Co and LIG ES SPAC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.