Correlation Between Miwon Chemical and Woori Financial

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

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

Diversification Opportunities for Miwon Chemical and Woori Financial

-0.47

Correlation Coefficient

Miwon Chemical  Woori Financial

Very good diversification

The 3 months correlation between Miwon and Woori is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Miwon Chemical 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 Miwon Chemical 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 Miwon Chemical 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 Miwon Chemical i.e., Miwon Chemical and Woori Financial go up and down completely randomly.

Pair Corralation between Miwon Chemical and Woori Financial

Assuming the 90 days trading horizon Miwon Chemical is expected to generate 1.35 times less return on investment than Woori Financial. But when comparing it to its historical volatility, Miwon Chemical is 1.62 times less risky than Woori Financial. It trades about 0.06 of its potential returns per unit of risk. Woori Financial Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,111,205  in Woori Financial Group on September 26, 2024 and sell it today you would earn a total of  462,795  from holding Woori Financial Group or generate 41.65% return on investment over 90 days.

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

Miwon Chemical  vs.  Woori Financial Group

Miwon Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Miwon Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Miwon Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Woori Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woori Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Woori Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Miwon Chemical and Woori Financial

The main advantage of trading using opposite Miwon Chemical and Woori Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Miwon Chemical 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 Miwon Chemical 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.