Correlation Between Woori Financial and BNK Financial

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

Diversification Opportunities for Woori Financial and BNK Financial

0.54

Correlation Coefficient

Woori Financial  BNK Financial

Very weak diversification

The 3 months correlation between Woori and BNK is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and BNK Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNK Financial Group 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 BNK Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNK Financial Group has no effect on the direction of Woori Financial i.e., Woori Financial and BNK Financial go up and down completely randomly.

Pair Corralation between Woori Financial and BNK Financial

Assuming the 90 days trading horizon Woori Financial is expected to generate 2.87 times less return on investment than BNK Financial. But when comparing it to its historical volatility, Woori Financial Group is 1.22 times less risky than BNK Financial. It trades about 0.03 of its potential returns per unit of risk. BNK Financial Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,050,391  in BNK Financial Group on December 2, 2024 and sell it today you would earn a total of  65,609  from holding BNK Financial Group or generate 6.25% return on investment over 90 days.

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

Woori Financial Group  vs.  BNK Financial Group

Woori Financial Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Financial Group are ranked lower than 1 (%) 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.

BNK Financial Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BNK Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BNK Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Woori Financial and BNK Financial

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

The idea behind Woori Financial Group and BNK Financial Group 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.