Correlation Between Woori Financial and HomeStreet

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

Diversification Opportunities for Woori Financial and HomeStreet

0.67

Correlation Coefficient

Woori Financial  HomeStreet

Poor diversification

The 3 months correlation between Woori and HomeStreet is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and HomeStreet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeStreet 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 HomeStreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeStreet has no effect on the direction of Woori Financial i.e., Woori Financial and HomeStreet go up and down completely randomly.

Pair Corralation between Woori Financial and HomeStreet

Allowing for the 90-day total investment horizon Woori Financial Group is expected to under-perform the HomeStreet. But the stock apears to be less risky and, when comparing its historical volatility, Woori Financial Group is 1.59 times less risky than HomeStreet. The stock trades about -0.47 of its potential returns per unit of risk. The HomeStreet is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  1,188  in HomeStreet on September 29, 2024 and sell it today you would lose (72.00) from holding HomeStreet or give up 6.06% of portfolio value over 90 days.

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

Woori Financial Group  vs.  HomeStreet

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HomeStreet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeStreet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Woori Financial and HomeStreet

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

The idea behind Woori Financial Group and HomeStreet 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.