Correlation Between Bohae Brewery and Woori Technology

Can any of the company-specific risk be diversified away by investing in both Bohae Brewery and Woori Technology 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 Bohae Brewery and Woori Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bohae Brewery and Woori Technology, you can compare the effects of market volatilities on Bohae Brewery and Woori Technology 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 Bohae Brewery with a short position of Woori Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bohae Brewery and Woori Technology.

Diversification Opportunities for Bohae Brewery and Woori Technology

-0.15

Correlation Coefficient

Bohae Brewery  Woori Technology

Good diversification

The 3 months correlation between Bohae and Woori is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bohae Brewery and Woori Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology and Bohae Brewery 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 Bohae Brewery are associated (or correlated) with Woori Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woori Technology has no effect on the direction of Bohae Brewery i.e., Bohae Brewery and Woori Technology go up and down completely randomly.

Pair Corralation between Bohae Brewery and Woori Technology

Assuming the 90 days trading horizon Bohae Brewery is expected to under-perform the Woori Technology. But the stock apears to be less risky and, when comparing its historical volatility, Bohae Brewery is 1.59 times less risky than Woori Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Woori Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  130,800  in Woori Technology on September 13, 2024 and sell it today you would earn a total of  39,500  from holding Woori Technology or generate 30.2% return on investment over 90 days.

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

Bohae Brewery  vs.  Woori Technology

Bohae Brewery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bohae Brewery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bohae Brewery sustained solid returns over the last few months and may actually be approaching a breakup point.

Woori Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woori Technology 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bohae Brewery and Woori Technology

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

The idea behind Bohae Brewery and Woori Technology 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.