Correlation Between Toronto Dominion and Woori Financial

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

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

Diversification Opportunities for Toronto Dominion and Woori Financial

0.45

Correlation Coefficient

Toronto Dominion  Woori Financial

Very weak diversification

The 3 months correlation between Toronto and Woori is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Toronto Dominion Bank 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 Toronto Dominion 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 Toronto Dominion Bank 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 Toronto Dominion i.e., Toronto Dominion and Woori Financial go up and down completely randomly.

Pair Corralation between Toronto Dominion and Woori Financial

Allowing for the 90-day total investment horizon Toronto Dominion Bank is expected to under-perform the Woori Financial. But the stock apears to be less risky and, when comparing its historical volatility, Toronto Dominion Bank is 1.3 times less risky than Woori Financial. The stock trades about -0.15 of its potential returns per unit of risk. The Woori Financial Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,438  in Woori Financial Group on September 12, 2024 and sell it today you would lose (167.00) from holding Woori Financial Group or give up 4.86% of portfolio value over 90 days.

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

Toronto Dominion Bank  vs.  Woori Financial Group

Toronto Dominion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toronto Dominion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 nearly stable technical and fundamental indicators, Woori Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Toronto Dominion and Woori Financial

The main advantage of trading using opposite Toronto Dominion and Woori Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toronto Dominion 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 Toronto Dominion Bank 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 Global Correlations module to find global opportunities by holding instruments from different markets.