Correlation Between Woori Financial and Washington Trust

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

Diversification Opportunities for Woori Financial and Washington Trust

0.55

Correlation Coefficient

Woori Financial  Washington Trust

Very weak diversification

The 3 months correlation between Woori and Washington is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and Washington Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Trust 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 Washington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Trust Bancorp has no effect on the direction of Woori Financial i.e., Woori Financial and Washington Trust go up and down completely randomly.

Pair Corralation between Woori Financial and Washington Trust

Allowing for the 90-day total investment horizon Woori Financial Group is expected to generate 0.71 times more return on investment than Washington Trust. However, Woori Financial Group is 1.42 times less risky than Washington Trust. It trades about -0.06 of its potential returns per unit of risk. Washington Trust Bancorp is currently generating about -0.09 per unit of risk. If you would invest  3,586  in Woori Financial Group on November 30, 2024 and sell it today you would lose (212.00) from holding Woori Financial Group or give up 5.91% of portfolio value over 90 days.

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

Woori Financial Group  vs.  Washington Trust Bancorp

Woori Financial Group

Risk-Adjusted Performance

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.

Washington Trust Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Washington Trust Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Woori Financial and Washington Trust

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

The idea behind Woori Financial Group and Washington Trust 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.