Correlation Between Doosan Engine and Samsung Electronics

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

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

Diversification Opportunities for Doosan Engine and Samsung Electronics

0.28

Correlation Coefficient

Doosan Engine  Samsung Electronics

Modest diversification

The 3 months correlation between Doosan and Samsung is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Engine Co and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics and Doosan Engine 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 Engine Co are associated (or correlated) with Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of Doosan Engine i.e., Doosan Engine and Samsung Electronics go up and down completely randomly.

Pair Corralation between Doosan Engine and Samsung Electronics

Assuming the 90 days trading horizon Doosan Engine Co is expected to generate 2.62 times more return on investment than Samsung Electronics. However, Doosan Engine is 2.62 times more volatile than Samsung Electronics Co. It trades about 0.13 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about 0.12 per unit of risk. If you would invest  1,764,000  in Doosan Engine Co on December 24, 2024 and sell it today you would earn a total of  596,000  from holding Doosan Engine Co or generate 33.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Doosan Engine Co  vs.  Samsung Electronics Co

Doosan Engine

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Engine Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Engine sustained solid returns over the last few months and may actually be approaching a breakup point.

Samsung Electronics

Risk-Adjusted Performance

OK

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

Pair Trading with Doosan Engine and Samsung Electronics

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

The idea behind Doosan Engine Co and Samsung Electronics 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.