Correlation Between First Interstate and Woori Financial

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

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

Diversification Opportunities for First Interstate and Woori Financial

-0.28

Correlation Coefficient

First Interstate  Woori Financial

Very good diversification

The 3 months correlation between First and Woori is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem and Woori Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Financial Group and First Interstate 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 First Interstate BancSystem are associated (or correlated) with Woori Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woori Financial Group has no effect on the direction of First Interstate i.e., First Interstate and Woori Financial go up and down completely randomly.

Pair Corralation between First Interstate and Woori Financial

Given the investment horizon of 90 days First Interstate BancSystem is expected to generate 1.64 times more return on investment than Woori Financial. However, First Interstate is 1.64 times more volatile than Woori Financial Group. It trades about 0.07 of its potential returns per unit of risk. Woori Financial Group is currently generating about -0.14 per unit of risk. If you would invest  2,904  in First Interstate BancSystem on October 5, 2024 and sell it today you would earn a total of  292.00  from holding First Interstate BancSystem or generate 10.06% return on investment over 90 days.

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

First Interstate BancSystem  vs.  Woori Financial Group

First Interstate Ban

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Interstate BancSystem are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, First Interstate may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Woori Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woori Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with First Interstate and Woori Financial

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

The idea behind First Interstate BancSystem and Woori 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.