Correlation Between Woori Financial and Industrial Bank

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

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

Diversification Opportunities for Woori Financial and Industrial Bank

0.81

Correlation Coefficient

Woori Financial  Industrial Bank

Very poor diversification

The 3 months correlation between Woori and Industrial is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and Industrial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank and Woori Financial 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 Woori Financial Group are associated (or correlated) with Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of Woori Financial i.e., Woori Financial and Industrial Bank go up and down completely randomly.

Pair Corralation between Woori Financial and Industrial Bank

Assuming the 90 days trading horizon Woori Financial is expected to generate 1.51 times less return on investment than Industrial Bank. In addition to that, Woori Financial is 1.55 times more volatile than Industrial Bank. It trades about 0.05 of its total potential returns per unit of risk. Industrial Bank is currently generating about 0.12 per unit of volatility. If you would invest  1,404,000  in Industrial Bank on August 31, 2024 and sell it today you would earn a total of  105,000  from holding Industrial Bank or generate 7.48% return on investment over 90 days.

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

Woori Financial Group  vs.  Industrial Bank

Woori Financial Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Industrial Bank

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Bank may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Woori Financial and Industrial Bank

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

The idea behind Woori Financial Group and Industrial Bank 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.