Correlation Between Woori Financial and ASML Holding

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

Diversification Opportunities for Woori Financial and ASML Holding

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Woori and ASML is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Woori Financial Group and ASML Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML Holding NV 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 ASML Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASML Holding NV has no effect on the direction of Woori Financial i.e., Woori Financial and ASML Holding go up and down completely randomly.

Pair Corralation between Woori Financial and ASML Holding

Allowing for the 90-day total investment horizon Woori Financial is expected to generate 4.76 times less return on investment than ASML Holding. But when comparing it to its historical volatility, Woori Financial Group is 1.36 times less risky than ASML Holding. It trades about 0.01 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  59,866  in ASML Holding NV on December 29, 2023 and sell it today you would earn a total of  37,535  from holding ASML Holding NV or generate 62.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Woori Financial Group  vs.  ASML Holding NV

 Performance 
       Timeline  
Woori Financial Group 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Woori Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Woori Financial reported solid returns over the last few months and may actually be approaching a breakup point.
ASML Holding NV 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady primary indicators, ASML Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.

Woori Financial and ASML Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Woori Financial and ASML Holding

The main advantage of trading using opposite Woori Financial and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woori Financial position performs unexpectedly, ASML Holding 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 ASML Holding will offset losses from the drop in ASML Holding's long position.
The idea behind Woori Financial Group and ASML Holding NV 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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