Correlation Between Woori Financial and Daou Data

Can any of the company-specific risk be diversified away by investing in both Woori Financial and Daou Data 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 Daou Data 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 Daou Data Corp, you can compare the effects of market volatilities on Woori Financial and Daou Data 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 Daou Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woori Financial and Daou Data.

Diversification Opportunities for Woori Financial and Daou Data

0.81

Correlation Coefficient

Woori Financial  Daou Data

Very poor diversification

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

Pair Corralation between Woori Financial and Daou Data

Assuming the 90 days trading horizon Woori Financial is expected to generate 1.23 times less return on investment than Daou Data. But when comparing it to its historical volatility, Woori Financial Group is 1.06 times less risky than Daou Data. It trades about 0.16 of its potential returns per unit of risk. Daou Data Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,021,000  in Daou Data Corp on December 25, 2024 and sell it today you would earn a total of  164,000  from holding Daou Data Corp or generate 16.06% 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.  Daou Data Corp

Woori Financial Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Financial Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Woori Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Daou Data Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Daou Data Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daou Data sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woori Financial and Daou Data

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

The idea behind Woori Financial Group and Daou Data Corp 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 Stocks Directory module to find actively traded stocks across global markets.