Correlation Between Woori Financial and First Foundation

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

Diversification Opportunities for Woori Financial and First Foundation

-0.16

Correlation Coefficient

Woori Financial  First Foundation

Good diversification

The 3 months correlation between Woori and First is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and First Foundation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Foundation 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 First Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Foundation has no effect on the direction of Woori Financial i.e., Woori Financial and First Foundation go up and down completely randomly.

Pair Corralation between Woori Financial and First Foundation

Allowing for the 90-day total investment horizon Woori Financial Group is expected to generate 0.47 times more return on investment than First Foundation. However, Woori Financial Group is 2.15 times less risky than First Foundation. It trades about 0.05 of its potential returns per unit of risk. First Foundation is currently generating about -0.24 per unit of risk. If you would invest  3,117  in Woori Financial Group on February 4, 2024 and sell it today you would earn a total of  56.00  from holding Woori Financial Group or generate 1.8% return on investment over 90 days.

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

Woori Financial Group  vs.  First Foundation

Woori Financial Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Woori Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

First Foundation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Foundation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Woori Financial and First Foundation

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

The idea behind Woori Financial Group and First Foundation 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.