Correlation Between Doosan Heavy and Samsung Life

Can any of the company-specific risk be diversified away by investing in both Doosan Heavy and Samsung Life 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 Samsung Life 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 Samsung Life Insurance, you can compare the effects of market volatilities on Doosan Heavy and Samsung Life 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 Samsung Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doosan Heavy and Samsung Life.

Diversification Opportunities for Doosan Heavy and Samsung Life

0.61

Correlation Coefficient

Doosan Heavy  Samsung Life

Poor diversification

The 3 months correlation between Doosan and Samsung is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Heavy Ind and Samsung Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Life Insurance 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 Samsung Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Life Insurance has no effect on the direction of Doosan Heavy i.e., Doosan Heavy and Samsung Life go up and down completely randomly.

Pair Corralation between Doosan Heavy and Samsung Life

Assuming the 90 days trading horizon Doosan Heavy is expected to generate 3.98 times less return on investment than Samsung Life. In addition to that, Doosan Heavy is 1.27 times more volatile than Samsung Life Insurance. It trades about 0.01 of its total potential returns per unit of risk. Samsung Life Insurance is currently generating about 0.04 per unit of volatility. If you would invest  9,320,000  in Samsung Life Insurance on September 30, 2024 and sell it today you would earn a total of  400,000  from holding Samsung Life Insurance or generate 4.29% return on investment over 90 days.

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

Doosan Heavy Ind  vs.  Samsung Life Insurance

Doosan Heavy Ind

Risk-Adjusted Performance

0 of 100

Very Weak

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

Samsung Life Insurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Life Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Samsung Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Doosan Heavy and Samsung Life

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

The idea behind Doosan Heavy Ind and Samsung Life Insurance 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.