Correlation Between Hwasung Industrial and Doosan Fuel

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

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

Diversification Opportunities for Hwasung Industrial and Doosan Fuel

0.06

Correlation Coefficient

Hwasung Industrial  Doosan Fuel

Significant diversification

The 3 months correlation between Hwasung and Doosan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hwasung Industrial Co and Doosan Fuel Cell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Fuel Cell and Hwasung Industrial 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 Hwasung Industrial Co are associated (or correlated) with Doosan Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Fuel Cell has no effect on the direction of Hwasung Industrial i.e., Hwasung Industrial and Doosan Fuel go up and down completely randomly.

Pair Corralation between Hwasung Industrial and Doosan Fuel

Assuming the 90 days trading horizon Hwasung Industrial Co is expected to generate 0.38 times more return on investment than Doosan Fuel. However, Hwasung Industrial Co is 2.61 times less risky than Doosan Fuel. It trades about 0.01 of its potential returns per unit of risk. Doosan Fuel Cell is currently generating about -0.02 per unit of risk. If you would invest  949,428  in Hwasung Industrial Co on October 4, 2024 and sell it today you would earn a total of  24,572  from holding Hwasung Industrial Co or generate 2.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.69%
Values	Daily Returns

Hwasung Industrial Co  vs.  Doosan Fuel Cell

Hwasung Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hwasung Industrial Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hwasung Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Doosan Fuel Cell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Doosan Fuel Cell has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hwasung Industrial and Doosan Fuel

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

The idea behind Hwasung Industrial Co and Doosan Fuel Cell 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.