Correlation Between Doosan Bobcat and Poongsan

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

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

Diversification Opportunities for Doosan Bobcat and Poongsan

-0.46

Correlation Coefficient

Doosan Bobcat  Poongsan

Very good diversification

The 3 months correlation between Doosan and Poongsan is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Bobcat and Poongsan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poongsan and Doosan Bobcat 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 Bobcat are associated (or correlated) with Poongsan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poongsan has no effect on the direction of Doosan Bobcat i.e., Doosan Bobcat and Poongsan go up and down completely randomly.

Pair Corralation between Doosan Bobcat and Poongsan

Assuming the 90 days trading horizon Doosan Bobcat is expected to generate 0.88 times more return on investment than Poongsan. However, Doosan Bobcat is 1.14 times less risky than Poongsan. It trades about 0.08 of its potential returns per unit of risk. Poongsan is currently generating about -0.03 per unit of risk. If you would invest  4,200,000  in Doosan Bobcat on September 23, 2024 and sell it today you would earn a total of  520,000  from holding Doosan Bobcat or generate 12.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Doosan Bobcat  vs.  Poongsan

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.

Poongsan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Poongsan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Doosan Bobcat and Poongsan

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

The idea behind Doosan Bobcat and Poongsan 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.