Correlation Between Kumho Ind and Woori Technology

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

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

Diversification Opportunities for Kumho Ind and Woori Technology

-0.81

Correlation Coefficient

Kumho Ind  Woori Technology

Pay attention - limited upside

The 3 months correlation between Kumho and Woori is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Kumho Ind and Woori Technology Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology Inv and Kumho Ind 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 Kumho Ind 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 Inv has no effect on the direction of Kumho Ind i.e., Kumho Ind and Woori Technology go up and down completely randomly.

Pair Corralation between Kumho Ind and Woori Technology

Assuming the 90 days trading horizon Kumho Ind is expected to under-perform the Woori Technology. But the stock apears to be less risky and, when comparing its historical volatility, Kumho Ind is 1.91 times less risky than Woori Technology. The stock trades about -0.12 of its potential returns per unit of risk. The Woori Technology Investment is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  714,000  in Woori Technology Investment on September 3, 2024 and sell it today you would earn a total of  164,000  from holding Woori Technology Investment or generate 22.97% return on investment over 90 days.

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

Kumho Ind  vs.  Woori Technology Investment

Kumho Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumho Ind 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.

Woori Technology Inv

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Technology Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Woori Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kumho Ind and Woori Technology

The main advantage of trading using opposite Kumho Ind and Woori Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumho Ind 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 Kumho Ind and Woori Technology Investment 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.