Correlation Between Doosan Engine and Vitzro Tech

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

Diversification Opportunities for Doosan Engine and Vitzro Tech

0.04

Correlation Coefficient

Doosan Engine  Vitzro Tech

Significant diversification

The 3 months correlation between Doosan and Vitzro is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Engine Co and Vitzro Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitzro Tech 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 Vitzro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitzro Tech has no effect on the direction of Doosan Engine i.e., Doosan Engine and Vitzro Tech go up and down completely randomly.

Pair Corralation between Doosan Engine and Vitzro Tech

Assuming the 90 days trading horizon Doosan Engine Co is expected to generate 1.26 times more return on investment than Vitzro Tech. However, Doosan Engine is 1.26 times more volatile than Vitzro Tech Co. It trades about 0.54 of its potential returns per unit of risk. Vitzro Tech Co is currently generating about 0.48 per unit of risk. If you would invest  1,421,000  in Doosan Engine Co on October 9, 2024 and sell it today you would earn a total of  508,000  from holding Doosan Engine Co or generate 35.75% return on investment over 90 days.

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

Doosan Engine Co  vs.  Vitzro Tech Co

Doosan Engine

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Engine Co are ranked lower than 9 (%) 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.

Vitzro Tech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vitzro Tech Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Vitzro Tech 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 Engine and Vitzro Tech

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

The idea behind Doosan Engine Co and Vitzro Tech 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.