Correlation Between Woori Financial and South Plains

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

Diversification Opportunities for Woori Financial and South Plains

-0.3

Correlation Coefficient

Woori Financial  South Plains

Very good diversification

The 3 months correlation between Woori and South is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and South Plains Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Plains Financial 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 South Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Plains Financial has no effect on the direction of Woori Financial i.e., Woori Financial and South Plains go up and down completely randomly.

Pair Corralation between Woori Financial and South Plains

Allowing for the 90-day total investment horizon Woori Financial Group is expected to generate 0.89 times more return on investment than South Plains. However, Woori Financial Group is 1.12 times less risky than South Plains. It trades about 0.06 of its potential returns per unit of risk. South Plains Financial is currently generating about 0.04 per unit of risk. If you would invest  2,332  in Woori Financial Group on September 4, 2024 and sell it today you would earn a total of  1,254  from holding Woori Financial Group or generate 53.77% 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.  South Plains Financial

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

South Plains Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in South Plains Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, South Plains demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Woori Financial and South Plains

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

The idea behind Woori Financial Group and South Plains Financial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.