Correlation Between Raontech and Woori Technology

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

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

Diversification Opportunities for Raontech and Woori Technology

-0.38

Correlation Coefficient

Raontech  Woori Technology

Very good diversification

The 3 months correlation between Raontech and Woori is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Raontech and Woori Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology and Raontech 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 Raontech 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 has no effect on the direction of Raontech i.e., Raontech and Woori Technology go up and down completely randomly.

Pair Corralation between Raontech and Woori Technology

Assuming the 90 days trading horizon Raontech is expected to generate 1.28 times more return on investment than Woori Technology. However, Raontech is 1.28 times more volatile than Woori Technology. It trades about 0.02 of its potential returns per unit of risk. Woori Technology is currently generating about -0.02 per unit of risk. If you would invest  293,500  in Raontech on November 29, 2024 and sell it today you would earn a total of  1,000.00  from holding Raontech or generate 0.34% return on investment over 90 days.

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

Raontech  vs.  Woori Technology

Raontech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Raontech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Raontech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Woori Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woori Technology has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Raontech and Woori Technology

The main advantage of trading using opposite Raontech and Woori Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raontech 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 Raontech and Woori Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.