Correlation Between Doosan Heavy and Hyosung Heavy

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

Diversification Opportunities for Doosan Heavy and Hyosung Heavy

0.67

Correlation Coefficient

Doosan Heavy  Hyosung Heavy

Poor diversification

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

Pair Corralation between Doosan Heavy and Hyosung Heavy

Assuming the 90 days trading horizon Doosan Heavy Ind is expected to generate 0.84 times more return on investment than Hyosung Heavy. However, Doosan Heavy Ind is 1.19 times less risky than Hyosung Heavy. It trades about 0.12 of its potential returns per unit of risk. Hyosung Heavy Industries is currently generating about 0.07 per unit of risk. If you would invest  2,070,000  in Doosan Heavy Ind on December 2, 2024 and sell it today you would earn a total of  470,000  from holding Doosan Heavy Ind or generate 22.71% 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.  Hyosung Heavy Industries

Doosan Heavy Ind

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Heavy Ind are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Hyosung Heavy Industries

Risk-Adjusted Performance

Modest

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

Pair Trading with Doosan Heavy and Hyosung Heavy

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

The idea behind Doosan Heavy Ind and Hyosung Heavy Industries 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.