Correlation Between Company K and Woori Technology

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

Diversification Opportunities for Company K and Woori Technology

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Company and Woori is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Company K Partners and Woori Technology Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology Inv and Company K 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 Company K Partners 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 Inv has no effect on the direction of Company K i.e., Company K and Woori Technology go up and down completely randomly.

Pair Corralation between Company K and Woori Technology

Assuming the 90 days trading horizon Company K is expected to generate 2.33 times less return on investment than Woori Technology. In addition to that, Company K is 1.04 times more volatile than Woori Technology Investment. It trades about 0.01 of its total potential returns per unit of risk. Woori Technology Investment is currently generating about 0.01 per unit of volatility. If you would invest  710,000  in Woori Technology Investment on October 4, 2024 and sell it today you would lose (18,000) from holding Woori Technology Investment or give up 2.54% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Company K Partners  vs.  Woori Technology Investment

 Performance 
       Timeline  
Company K Partners 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Woori Technology Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Company K and Woori Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Company K and Woori Technology

The main advantage of trading using opposite Company K and Woori Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Company K 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 Company K Partners and Woori Technology Investment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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