Correlation Between Daejoo Electronic and Woori Technology

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

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

Diversification Opportunities for Daejoo Electronic and Woori Technology

-0.21

Correlation Coefficient

Daejoo Electronic  Woori Technology

Very good diversification

The 3 months correlation between Daejoo and Woori is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and Woori Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woori Technology and Daejoo Electronic 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 Daejoo Electronic Materials 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 Daejoo Electronic i.e., Daejoo Electronic and Woori Technology go up and down completely randomly.

Pair Corralation between Daejoo Electronic and Woori Technology

Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to under-perform the Woori Technology. In addition to that, Daejoo Electronic is 1.04 times more volatile than Woori Technology. It trades about -0.07 of its total potential returns per unit of risk. Woori Technology is currently generating about -0.01 per unit of volatility. If you would invest  231,000  in Woori Technology on September 4, 2024 and sell it today you would lose (11,000) from holding Woori Technology or give up 4.76% of portfolio value over 90 days.

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

Daejoo Electronic Materials  vs.  Woori Technology

Daejoo Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daejoo Electronic Materials 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

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 somewhat strong basic indicators, Woori Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daejoo Electronic and Woori Technology

The main advantage of trading using opposite Daejoo Electronic and Woori Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic 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 Daejoo Electronic Materials 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.