Correlation Between Doosan Fuel and KT

Can any of the company-specific risk be diversified away by investing in both Doosan Fuel and KT 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 KT 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 KT Corporation, you can compare the effects of market volatilities on Doosan Fuel and KT 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 KT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doosan Fuel and KT.

Diversification Opportunities for Doosan Fuel and KT

0.02

Correlation Coefficient

Doosan Fuel  KT

Significant diversification

The 3 months correlation between Doosan and KT is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Fuel Cell and KT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KT Corporation 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 KT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KT Corporation has no effect on the direction of Doosan Fuel i.e., Doosan Fuel and KT go up and down completely randomly.

Pair Corralation between Doosan Fuel and KT

Assuming the 90 days trading horizon Doosan Fuel Cell is expected to under-perform the KT. In addition to that, Doosan Fuel is 1.89 times more volatile than KT Corporation. It trades about -0.04 of its total potential returns per unit of risk. KT Corporation is currently generating about 0.05 per unit of volatility. If you would invest  3,121,976  in KT Corporation on October 4, 2024 and sell it today you would earn a total of  1,273,024  from holding KT Corporation or generate 40.78% return on investment over 90 days.

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

Doosan Fuel Cell  vs.  KT Corp.

Doosan Fuel Cell

Risk-Adjusted Performance

0 of 100

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.

KT Corporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KT Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Doosan Fuel and KT

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

The idea behind Doosan Fuel Cell and KT Corporation 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.