Correlation Between Woori Financial and Nissan Chemical

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

Diversification Opportunities for Woori Financial and Nissan Chemical

0.72

Correlation Coefficient

Woori Financial  Nissan Chemical

Poor diversification

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

Pair Corralation between Woori Financial and Nissan Chemical

Allowing for the 90-day total investment horizon Woori Financial Group is expected to under-perform the Nissan Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Woori Financial Group is 5.43 times less risky than Nissan Chemical. The stock trades about -0.49 of its potential returns per unit of risk. The Nissan Chemical Industries is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,417  in Nissan Chemical Industries on October 5, 2024 and sell it today you would lose (256.00) from holding Nissan Chemical Industries or give up 7.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Woori Financial Group  vs.  Nissan Chemical Industries

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

Nissan Chemical Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Nissan Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Woori Financial and Nissan Chemical

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

The idea behind Woori Financial Group and Nissan Chemical Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.