Correlation Between Cheryong Industrial and Woori Technology

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Can any of the company-specific risk be diversified away by investing in both Cheryong Industrial and Woori Technology 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 Cheryong Industrial and Woori Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheryong Industrial CoLtd and Woori Technology, you can compare the effects of market volatilities on Cheryong Industrial and Woori Technology 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 Cheryong Industrial with a short position of Woori Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheryong Industrial and Woori Technology.

Diversification Opportunities for Cheryong Industrial and Woori Technology

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Cheryong and Woori is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cheryong Industrial CoLtd and Woori Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology and Cheryong Industrial 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 Cheryong Industrial CoLtd are associated (or correlated) with Woori Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woori Technology has no effect on the direction of Cheryong Industrial i.e., Cheryong Industrial and Woori Technology go up and down completely randomly.

Pair Corralation between Cheryong Industrial and Woori Technology

Assuming the 90 days trading horizon Cheryong Industrial CoLtd is expected to generate 1.21 times more return on investment than Woori Technology. However, Cheryong Industrial is 1.21 times more volatile than Woori Technology. It trades about 0.06 of its potential returns per unit of risk. Woori Technology is currently generating about 0.04 per unit of risk. If you would invest  317,259  in Cheryong Industrial CoLtd on October 27, 2024 and sell it today you would earn a total of  386,741  from holding Cheryong Industrial CoLtd or generate 121.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cheryong Industrial CoLtd  vs.  Woori Technology

 Performance 
       Timeline  
Cheryong Industrial CoLtd 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Cheryong Industrial CoLtd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cheryong Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.
Woori Technology 

Risk-Adjusted Performance

0 of 100

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

Cheryong Industrial and Woori Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cheryong Industrial and Woori Technology

The main advantage of trading using opposite Cheryong Industrial and Woori Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheryong Industrial position performs unexpectedly, Woori Technology 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 Technology will offset losses from the drop in Woori Technology's long position.
The idea behind Cheryong Industrial CoLtd and Woori Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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