Correlation Between Kukdong Oil and Doosan Solus

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

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

Diversification Opportunities for Kukdong Oil and Doosan Solus

0.69

Correlation Coefficient

Kukdong Oil  Doosan Solus

Poor diversification

The 3 months correlation between Kukdong and Doosan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kukdong Oil Chemicals and Doosan Solus Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Solus and Kukdong Oil 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 Kukdong Oil Chemicals are associated (or correlated) with Doosan Solus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Solus has no effect on the direction of Kukdong Oil i.e., Kukdong Oil and Doosan Solus go up and down completely randomly.

Pair Corralation between Kukdong Oil and Doosan Solus

Assuming the 90 days trading horizon Kukdong Oil is expected to generate 1.45 times less return on investment than Doosan Solus. But when comparing it to its historical volatility, Kukdong Oil Chemicals is 1.46 times less risky than Doosan Solus. It trades about 0.42 of its potential returns per unit of risk. Doosan Solus Co is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  170,300  in Doosan Solus Co on October 9, 2024 and sell it today you would earn a total of  32,200  from holding Doosan Solus Co or generate 18.91% return on investment over 90 days.

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

Kukdong Oil Chemicals  vs.  Doosan Solus Co

Kukdong Oil Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Doosan Solus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Doosan Solus Co 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.

Pair Trading with Kukdong Oil and Doosan Solus

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

The idea behind Kukdong Oil Chemicals and Doosan Solus 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 Stocks Directory module to find actively traded stocks across global markets.