Correlation Between Doosan Pref and Dong A

Can any of the company-specific risk be diversified away by investing in both Doosan Pref and Dong A 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 Dong A 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 Dong A Steel Technology, you can compare the effects of market volatilities on Doosan Pref and Dong A 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 Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doosan Pref and Dong A.

Diversification Opportunities for Doosan Pref and Dong A

0.53

Correlation Coefficient

Doosan Pref  Dong A

Very weak diversification

The 3 months correlation between Doosan and Dong is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Pref Shs and Dong A Steel Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Steel 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 Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Steel has no effect on the direction of Doosan Pref i.e., Doosan Pref and Dong A go up and down completely randomly.

Pair Corralation between Doosan Pref and Dong A

Assuming the 90 days trading horizon Doosan Pref Shs is expected to generate 2.09 times more return on investment than Dong A. However, Doosan Pref is 2.09 times more volatile than Dong A Steel Technology. It trades about 0.15 of its potential returns per unit of risk. Dong A Steel Technology is currently generating about 0.03 per unit of risk. If you would invest  10,760,000  in Doosan Pref Shs on December 23, 2024 and sell it today you would earn a total of  3,970,000  from holding Doosan Pref Shs or generate 36.9% 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.  Dong A Steel Technology

Doosan Pref Shs

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Pref Shs are ranked lower than 12 (%) 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.

Dong A Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Steel Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dong A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Doosan Pref and Dong A

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

The idea behind Doosan Pref Shs and Dong A Steel 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.