Correlation Between HK Electric and WOORI FIN

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

By analyzing existing cross correlation between HK Electric Investments and WOORI FIN GRP, you can compare the effects of market volatilities on HK Electric and WOORI FIN 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 HK Electric with a short position of WOORI FIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and WOORI FIN.

Diversification Opportunities for HK Electric and WOORI FIN

-0.11

Correlation Coefficient

HK Electric  WOORI FIN

Good diversification

The 3 months correlation between HKT and WOORI is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and WOORI FIN GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WOORI FIN GRP and HK Electric 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 HK Electric Investments are associated (or correlated) with WOORI FIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WOORI FIN GRP has no effect on the direction of HK Electric i.e., HK Electric and WOORI FIN go up and down completely randomly.

Pair Corralation between HK Electric and WOORI FIN

Assuming the 90 days trading horizon HK Electric Investments is expected to generate 1.02 times more return on investment than WOORI FIN. However, HK Electric is 1.02 times more volatile than WOORI FIN GRP. It trades about 0.17 of its potential returns per unit of risk. WOORI FIN GRP is currently generating about -0.36 per unit of risk. If you would invest  63.00  in HK Electric Investments on October 5, 2024 and sell it today you would earn a total of  2.00  from holding HK Electric Investments or generate 3.17% return on investment over 90 days.

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

HK Electric Investments  vs.  WOORI FIN GRP

HK Electric Investments

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days HK Electric Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady basic indicators, HK Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WOORI FIN GRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WOORI FIN GRP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, WOORI FIN is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HK Electric and WOORI FIN

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

The idea behind HK Electric Investments and WOORI FIN GRP 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 CEOs Directory module to screen CEOs from public companies around the world.