Correlation Between Hanshin Construction and Doosan Bobcat

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

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

Diversification Opportunities for Hanshin Construction and Doosan Bobcat

-0.51

Correlation Coefficient

Hanshin Construction  Doosan Bobcat

Excellent diversification

The 3 months correlation between Hanshin and Doosan is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hanshin Construction Co and Doosan Bobcat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Bobcat and Hanshin Construction 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 Hanshin Construction Co are associated (or correlated) with Doosan Bobcat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Bobcat has no effect on the direction of Hanshin Construction i.e., Hanshin Construction and Doosan Bobcat go up and down completely randomly.

Pair Corralation between Hanshin Construction and Doosan Bobcat

Assuming the 90 days trading horizon Hanshin Construction Co is expected to generate 0.8 times more return on investment than Doosan Bobcat. However, Hanshin Construction Co is 1.24 times less risky than Doosan Bobcat. It trades about 0.18 of its potential returns per unit of risk. Doosan Bobcat is currently generating about 0.09 per unit of risk. If you would invest  604,640  in Hanshin Construction Co on October 8, 2024 and sell it today you would earn a total of  42,360  from holding Hanshin Construction Co or generate 7.01% return on investment over 90 days.

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

Hanshin Construction Co  vs.  Doosan Bobcat

Hanshin Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanshin Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanshin Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Doosan Bobcat

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Bobcat are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Bobcat sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanshin Construction and Doosan Bobcat

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

The idea behind Hanshin Construction Co and Doosan Bobcat 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.