Correlation Between Woori Financial and Simmons First

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

Diversification Opportunities for Woori Financial and Simmons First

-0.32

Correlation Coefficient

Woori Financial  Simmons First

Very good diversification

The 3 months correlation between Woori and Simmons is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and Simmons First National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simmons First National 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 Simmons First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simmons First National has no effect on the direction of Woori Financial i.e., Woori Financial and Simmons First go up and down completely randomly.

Pair Corralation between Woori Financial and Simmons First

Allowing for the 90-day total investment horizon Woori Financial is expected to generate 1.65 times less return on investment than Simmons First. But when comparing it to its historical volatility, Woori Financial Group is 2.26 times less risky than Simmons First. It trades about 0.17 of its potential returns per unit of risk. Simmons First National is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,299  in Simmons First National on September 5, 2024 and sell it today you would earn a total of  143.00  from holding Simmons First National or generate 6.22% 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.  Simmons First National

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 nearly stable technical and fundamental indicators, Woori Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Simmons First National

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simmons First National are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Simmons First exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woori Financial and Simmons First

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

The idea behind Woori Financial Group and Simmons First National 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.