Correlation Between Doosan Heavy and Samick Musical

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

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

Diversification Opportunities for Doosan Heavy and Samick Musical

-0.48

Correlation Coefficient

Doosan Heavy  Samick Musical

Very good diversification

The 3 months correlation between Doosan and Samick is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Heavy Ind and Samick Musical Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samick Musical Instr and Doosan Heavy 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 Heavy Ind are associated (or correlated) with Samick Musical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samick Musical Instr has no effect on the direction of Doosan Heavy i.e., Doosan Heavy and Samick Musical go up and down completely randomly.

Pair Corralation between Doosan Heavy and Samick Musical

Assuming the 90 days trading horizon Doosan Heavy Ind is expected to generate 2.0 times more return on investment than Samick Musical. However, Doosan Heavy is 2.0 times more volatile than Samick Musical Instruments. It trades about 0.55 of its potential returns per unit of risk. Samick Musical Instruments is currently generating about 0.23 per unit of risk. If you would invest  1,757,000  in Doosan Heavy Ind on October 21, 2024 and sell it today you would earn a total of  418,000  from holding Doosan Heavy Ind or generate 23.79% return on investment over 90 days.

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

Doosan Heavy Ind  vs.  Samick Musical Instruments

Doosan Heavy Ind

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Heavy Ind are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Heavy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Samick Musical Instr

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Doosan Heavy and Samick Musical

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

The idea behind Doosan Heavy Ind and Samick Musical Instruments 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.