Correlation Between Design and Doosan Bobcat

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

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

Diversification Opportunities for Design and Doosan Bobcat

-0.51

Correlation Coefficient

Design  Doosan Bobcat

Excellent diversification

The 3 months correlation between Design and Doosan is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Design Co and Doosan Bobcat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Bobcat and Design 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 Design Co 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 Design i.e., Design and Doosan Bobcat go up and down completely randomly.

Pair Corralation between Design and Doosan Bobcat

Assuming the 90 days trading horizon Design Co is expected to under-perform the Doosan Bobcat. In addition to that, Design is 2.19 times more volatile than Doosan Bobcat. It trades about -0.27 of its total potential returns per unit of risk. Doosan Bobcat is currently generating about 0.39 per unit of volatility. If you would invest  3,695,000  in Doosan Bobcat on September 22, 2024 and sell it today you would earn a total of  1,025,000  from holding Doosan Bobcat or generate 27.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Design Co  vs.  Doosan Bobcat

Design

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Design Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Design sustained solid returns over the last few months and may actually be approaching a breakup point.

Doosan Bobcat

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Bobcat are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Bobcat sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Design and Doosan Bobcat

The main advantage of trading using opposite Design and Doosan Bobcat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Design 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 Design Co 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.