Correlation Between Doosan Fuel and SK Hynix

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

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

Diversification Opportunities for Doosan Fuel and SK Hynix

-0.04

Correlation Coefficient

Doosan Fuel  SK Hynix

Good diversification

The 3 months correlation between Doosan and 000660 is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Fuel Cell and SK Hynix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Hynix and Doosan Fuel 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 Fuel Cell are associated (or correlated) with SK Hynix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Hynix has no effect on the direction of Doosan Fuel i.e., Doosan Fuel and SK Hynix go up and down completely randomly.

Pair Corralation between Doosan Fuel and SK Hynix

Assuming the 90 days trading horizon Doosan Fuel Cell is expected to under-perform the SK Hynix. But the stock apears to be less risky and, when comparing its historical volatility, Doosan Fuel Cell is 1.37 times less risky than SK Hynix. The stock trades about -0.05 of its potential returns per unit of risk. The SK Hynix is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  15,990,000  in SK Hynix on November 29, 2024 and sell it today you would earn a total of  4,310,000  from holding SK Hynix or generate 26.95% return on investment over 90 days.

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

Doosan Fuel Cell  vs.  SK Hynix

Doosan Fuel Cell

Risk-Adjusted Performance

Very Weak

Over the last 90 days Doosan Fuel Cell 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.

SK Hynix

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SK Hynix are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Hynix sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Doosan Fuel and SK Hynix

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

The idea behind Doosan Fuel Cell and SK Hynix 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.