Correlation Between Grand Korea and Doosan Bobcat

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

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

Diversification Opportunities for Grand Korea and Doosan Bobcat

0.21

Correlation Coefficient

Grand Korea  Doosan Bobcat

Modest diversification

The 3 months correlation between Grand and Doosan is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Grand Korea Leisure and Doosan Bobcat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Bobcat and Grand Korea 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 Grand Korea Leisure are associated (or correlated) with Doosan Bobcat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Bobcat has no effect on the direction of Grand Korea i.e., Grand Korea and Doosan Bobcat go up and down completely randomly.

Pair Corralation between Grand Korea and Doosan Bobcat

Assuming the 90 days trading horizon Grand Korea Leisure is expected to generate 0.6 times more return on investment than Doosan Bobcat. However, Grand Korea Leisure is 1.67 times less risky than Doosan Bobcat. It trades about 0.14 of its potential returns per unit of risk. Doosan Bobcat is currently generating about 0.05 per unit of risk. If you would invest  1,108,000  in Grand Korea Leisure on October 6, 2024 and sell it today you would earn a total of  47,000  from holding Grand Korea Leisure or generate 4.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Grand Korea Leisure  vs.  Doosan Bobcat

Grand Korea Leisure

Risk-Adjusted Performance

0 of 100

Very Weak

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

Doosan Bobcat

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Bobcat are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Bobcat may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Grand Korea and Doosan Bobcat

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

The idea behind Grand Korea Leisure and Doosan Bobcat 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.