Correlation Between Doosan Fuel and Phoenix Materials

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

Diversification Opportunities for Doosan Fuel and Phoenix Materials

0.18

Correlation Coefficient

Doosan Fuel  Phoenix Materials

Average diversification

The 3 months correlation between Doosan and Phoenix is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Fuel Cell and Phoenix Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phoenix Materials 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 Phoenix Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phoenix Materials has no effect on the direction of Doosan Fuel i.e., Doosan Fuel and Phoenix Materials go up and down completely randomly.

Pair Corralation between Doosan Fuel and Phoenix Materials

Assuming the 90 days trading horizon Doosan Fuel Cell is expected to under-perform the Phoenix Materials. But the stock apears to be less risky and, when comparing its historical volatility, Doosan Fuel Cell is 2.19 times less risky than Phoenix Materials. The stock trades about -0.03 of its potential returns per unit of risk. The Phoenix Materials Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  65,900  in Phoenix Materials Co on December 2, 2024 and sell it today you would earn a total of  1,900  from holding Phoenix Materials Co or generate 2.88% 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.  Phoenix Materials Co

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 somewhat strong basic indicators, Doosan Fuel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Phoenix Materials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix Materials Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Phoenix Materials may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Doosan Fuel and Phoenix Materials

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

The idea behind Doosan Fuel Cell and Phoenix Materials Co 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.