Correlation Between Doosan Fuel and DeviceENGCOLtd

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

Diversification Opportunities for Doosan Fuel and DeviceENGCOLtd

0.06

Correlation Coefficient

Doosan Fuel  DeviceENGCOLtd

Significant diversification

The 3 months correlation between Doosan and DeviceENGCOLtd is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Fuel Cell and DeviceENGCOLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeviceENGCOLtd 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 DeviceENGCOLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeviceENGCOLtd has no effect on the direction of Doosan Fuel i.e., Doosan Fuel and DeviceENGCOLtd go up and down completely randomly.

Pair Corralation between Doosan Fuel and DeviceENGCOLtd

Assuming the 90 days trading horizon Doosan Fuel Cell is expected to generate 1.31 times more return on investment than DeviceENGCOLtd. However, Doosan Fuel is 1.31 times more volatile than DeviceENGCOLtd. It trades about 0.05 of its potential returns per unit of risk. DeviceENGCOLtd is currently generating about -0.03 per unit of risk. If you would invest  1,522,000  in Doosan Fuel Cell on November 20, 2024 and sell it today you would earn a total of  106,000  from holding Doosan Fuel Cell or generate 6.96% 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.  DeviceENGCOLtd

Doosan Fuel Cell

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Fuel Cell are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Fuel may actually be approaching a critical reversion point that can send shares even higher in March 2025.

DeviceENGCOLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days DeviceENGCOLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DeviceENGCOLtd 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 Fuel and DeviceENGCOLtd

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

The idea behind Doosan Fuel Cell and DeviceENGCOLtd 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.