Correlation Between Doosan Bobcat and Finebesteel

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

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

Diversification Opportunities for Doosan Bobcat and Finebesteel

0.52

Correlation Coefficient

Doosan Bobcat  Finebesteel

Very weak diversification

The 3 months correlation between Doosan and Finebesteel is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Bobcat and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel 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 Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of Doosan Bobcat i.e., Doosan Bobcat and Finebesteel go up and down completely randomly.

Pair Corralation between Doosan Bobcat and Finebesteel

Assuming the 90 days trading horizon Doosan Bobcat is expected to generate 0.96 times more return on investment than Finebesteel. However, Doosan Bobcat is 1.05 times less risky than Finebesteel. It trades about 0.09 of its potential returns per unit of risk. Finebesteel is currently generating about 0.03 per unit of risk. If you would invest  4,360,000  in Doosan Bobcat on December 27, 2024 and sell it today you would earn a total of  570,000  from holding Doosan Bobcat or generate 13.07% return on investment over 90 days.

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

Doosan Bobcat  vs.  Finebesteel

Doosan Bobcat

Risk-Adjusted Performance

OK

Over the last 90 days Doosan Bobcat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Doosan Bobcat sustained solid returns over the last few months and may actually be approaching a breakup point.

Finebesteel

Risk-Adjusted Performance

Weak

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

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

The idea behind Doosan Bobcat and Finebesteel 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.