Correlation Between Woori Financial and Bank Rakyat

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

Diversification Opportunities for Woori Financial and Bank Rakyat

0.67

Correlation Coefficient

Woori Financial  Bank Rakyat

Poor diversification

The 3 months correlation between Woori and Bank is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Rakyat 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 Bank Rakyat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Rakyat has no effect on the direction of Woori Financial i.e., Woori Financial and Bank Rakyat go up and down completely randomly.

Pair Corralation between Woori Financial and Bank Rakyat

Allowing for the 90-day total investment horizon Woori Financial Group is expected to generate 0.92 times more return on investment than Bank Rakyat. However, Woori Financial Group is 1.08 times less risky than Bank Rakyat. It trades about -0.09 of its potential returns per unit of risk. Bank Rakyat is currently generating about -0.52 per unit of risk. If you would invest  3,243  in Woori Financial Group on January 28, 2024 and sell it today you would lose (138.00) from holding Woori Financial Group or give up 4.26% of portfolio value over 90 days.

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

Woori Financial Group  vs.  Bank Rakyat

Woori Financial Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Woori Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Woori Financial and Bank Rakyat

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

The idea behind Woori Financial Group and Bank Rakyat 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.