Correlation Between Woori Financial and Merchants Bancorp

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

Diversification Opportunities for Woori Financial and Merchants Bancorp

0.72

Correlation Coefficient

Woori Financial  Merchants Bancorp

Poor diversification

The 3 months correlation between Woori and Merchants is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Woori Financial i.e., Woori Financial and Merchants Bancorp go up and down completely randomly.

Pair Corralation between Woori Financial and Merchants Bancorp

Allowing for the 90-day total investment horizon Woori Financial Group is expected to under-perform the Merchants Bancorp. In addition to that, Woori Financial is 1.81 times more volatile than Merchants Bancorp. It trades about -0.4 of its total potential returns per unit of risk. Merchants Bancorp is currently generating about -0.51 per unit of volatility. If you would invest  2,229  in Merchants Bancorp on September 26, 2024 and sell it today you would lose (159.00) from holding Merchants Bancorp or give up 7.13% 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.  Merchants Bancorp

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Merchants Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merchants Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Woori Financial and Merchants Bancorp

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

The idea behind Woori Financial Group and Merchants 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.