Correlation Between Doosan and KakaoBank Corp

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

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

Diversification Opportunities for Doosan and KakaoBank Corp

0.3

Correlation Coefficient

Doosan  KakaoBank Corp

Weak diversification

The 3 months correlation between Doosan and KakaoBank is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Co and KakaoBank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KakaoBank Corp and Doosan 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 Co are associated (or correlated) with KakaoBank Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KakaoBank Corp has no effect on the direction of Doosan i.e., Doosan and KakaoBank Corp go up and down completely randomly.

Pair Corralation between Doosan and KakaoBank Corp

Assuming the 90 days trading horizon Doosan Co is expected to generate 1.95 times more return on investment than KakaoBank Corp. However, Doosan is 1.95 times more volatile than KakaoBank Corp. It trades about 0.13 of its potential returns per unit of risk. KakaoBank Corp is currently generating about 0.07 per unit of risk. If you would invest  10,490,000  in Doosan Co on December 25, 2024 and sell it today you would earn a total of  2,970,000  from holding Doosan Co or generate 28.31% return on investment over 90 days.

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

Doosan Co  vs.  KakaoBank Corp

Doosan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan sustained solid returns over the last few months and may actually be approaching a breakup point.

KakaoBank Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KakaoBank Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KakaoBank Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Doosan and KakaoBank Corp

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

The idea behind Doosan Co and KakaoBank Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.