Correlation Between Doosan Pref and Youl Chon

Can any of the company-specific risk be diversified away by investing in both Doosan Pref and Youl Chon 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 Doosan Pref and Youl Chon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Doosan Pref Shs and Youl Chon Chemical, you can compare the effects of market volatilities on Doosan Pref and Youl Chon 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 Doosan Pref with a short position of Youl Chon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doosan Pref and Youl Chon.

Diversification Opportunities for Doosan Pref and Youl Chon

0.41

Correlation Coefficient

Doosan Pref  Youl Chon

Very weak diversification

The 3 months correlation between Doosan and Youl is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Pref Shs and Youl Chon Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youl Chon Chemical and Doosan Pref 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 Doosan Pref Shs are associated (or correlated) with Youl Chon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youl Chon Chemical has no effect on the direction of Doosan Pref i.e., Doosan Pref and Youl Chon go up and down completely randomly.

Pair Corralation between Doosan Pref and Youl Chon

Assuming the 90 days trading horizon Doosan Pref Shs is expected to generate 0.87 times more return on investment than Youl Chon. However, Doosan Pref Shs is 1.15 times less risky than Youl Chon. It trades about 0.2 of its potential returns per unit of risk. Youl Chon Chemical is currently generating about 0.09 per unit of risk. If you would invest  10,480,000  in Doosan Pref Shs on October 26, 2024 and sell it today you would earn a total of  4,870,000  from holding Doosan Pref Shs or generate 46.47% return on investment over 90 days.

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

Doosan Pref Shs  vs.  Youl Chon Chemical

Doosan Pref Shs

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Pref Shs are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Pref sustained solid returns over the last few months and may actually be approaching a breakup point.

Youl Chon Chemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Youl Chon Chemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youl Chon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Doosan Pref and Youl Chon

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

The idea behind Doosan Pref Shs and Youl Chon Chemical 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.