Correlation Between Samsung SDI and Doosan

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

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

Diversification Opportunities for Samsung SDI and Doosan

-0.67

Correlation Coefficient

Samsung SDI  Doosan

Excellent diversification

The 3 months correlation between Samsung and Doosan is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Samsung SDI and Doosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan and Samsung SDI 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 Samsung SDI are associated (or correlated) with Doosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan has no effect on the direction of Samsung SDI i.e., Samsung SDI and Doosan go up and down completely randomly.

Pair Corralation between Samsung SDI and Doosan

Assuming the 90 days trading horizon Samsung SDI is expected to under-perform the Doosan. In addition to that, Samsung SDI is 1.03 times more volatile than Doosan Co. It trades about -0.17 of its total potential returns per unit of risk. Doosan Co is currently generating about 0.11 per unit of volatility. If you would invest  10,380,000  in Doosan Co on October 6, 2024 and sell it today you would earn a total of  1,330,000  from holding Doosan Co or generate 12.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Samsung SDI  vs.  Doosan Co

Samsung SDI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung SDI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Doosan

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Co are ranked lower than 15 (%) 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.

Pair Trading with Samsung SDI and Doosan

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

The idea behind Samsung SDI and Doosan Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.