Correlation Between Woori Financial and Cathay General

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

Diversification Opportunities for Woori Financial and Cathay General

-0.33

Correlation Coefficient

Woori Financial  Cathay General

Very good diversification

The 3 months correlation between Woori and Cathay is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and Cathay General Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay General Bancorp 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 Cathay General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay General Bancorp has no effect on the direction of Woori Financial i.e., Woori Financial and Cathay General go up and down completely randomly.

Pair Corralation between Woori Financial and Cathay General

Allowing for the 90-day total investment horizon Woori Financial Group is expected to generate 0.93 times more return on investment than Cathay General. However, Woori Financial Group is 1.08 times less risky than Cathay General. It trades about 0.1 of its potential returns per unit of risk. Cathay General Bancorp is currently generating about -0.09 per unit of risk. If you would invest  3,121  in Woori Financial Group on December 28, 2024 and sell it today you would earn a total of  252.00  from holding Woori Financial Group or generate 8.07% return on investment over 90 days.

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

Woori Financial Group  vs.  Cathay General Bancorp

Woori Financial Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Woori Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cathay General Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cathay General Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Woori Financial and Cathay General

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

The idea behind Woori Financial Group and Cathay General Bancorp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.