Correlation Between WOOJUNG BIO and ABL Bio

Can any of the company-specific risk be diversified away by investing in both WOOJUNG BIO and ABL Bio 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 WOOJUNG BIO and ABL Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WOOJUNG BIO and ABL Bio, you can compare the effects of market volatilities on WOOJUNG BIO and ABL Bio 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 WOOJUNG BIO with a short position of ABL Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of WOOJUNG BIO and ABL Bio.

Diversification Opportunities for WOOJUNG BIO and ABL Bio

0.72

Correlation Coefficient

WOOJUNG BIO  ABL Bio

Poor diversification

The 3 months correlation between WOOJUNG and ABL is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding WOOJUNG BIO and ABL Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABL Bio and WOOJUNG BIO 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 WOOJUNG BIO are associated (or correlated) with ABL Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABL Bio has no effect on the direction of WOOJUNG BIO i.e., WOOJUNG BIO and ABL Bio go up and down completely randomly.

Pair Corralation between WOOJUNG BIO and ABL Bio

Assuming the 90 days trading horizon WOOJUNG BIO is expected to generate 1.02 times less return on investment than ABL Bio. But when comparing it to its historical volatility, WOOJUNG BIO is 1.33 times less risky than ABL Bio. It trades about 0.12 of its potential returns per unit of risk. ABL Bio is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,930,000  in ABL Bio on October 6, 2024 and sell it today you would earn a total of  185,000  from holding ABL Bio or generate 6.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

WOOJUNG BIO  vs.  ABL Bio

WOOJUNG BIO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WOOJUNG BIO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ABL Bio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with WOOJUNG BIO and ABL Bio

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

The idea behind WOOJUNG BIO and ABL Bio 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.