Correlation Between Woori Financial and Five Star

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

Diversification Opportunities for Woori Financial and Five Star

0.26

Correlation Coefficient

Woori Financial  Five Star

Modest diversification

The 3 months correlation between Woori and Five is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star 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 Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of Woori Financial i.e., Woori Financial and Five Star go up and down completely randomly.

Pair Corralation between Woori Financial and Five Star

Allowing for the 90-day total investment horizon Woori Financial Group is expected to under-perform the Five Star. But the stock apears to be less risky and, when comparing its historical volatility, Woori Financial Group is 1.27 times less risky than Five Star. The stock trades about -0.02 of its potential returns per unit of risk. The Five Star Bancorp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,877  in Five Star Bancorp on December 26, 2024 and sell it today you would lose (13.00) from holding Five Star Bancorp or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Woori Financial Group  vs.  Five Star 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.

Five Star Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Five Star Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Woori Financial and Five Star

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

The idea behind Woori Financial Group and Five Star 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.