Correlation Between Doosan Fuel and Echomarketing CoLtd

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

Diversification Opportunities for Doosan Fuel and Echomarketing CoLtd

0.32

Correlation Coefficient

Doosan Fuel  Echomarketing CoLtd

Weak diversification

The 3 months correlation between Doosan and Echomarketing is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Fuel Cell and Echomarketing CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Echomarketing CoLtd 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 Echomarketing CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Echomarketing CoLtd has no effect on the direction of Doosan Fuel i.e., Doosan Fuel and Echomarketing CoLtd go up and down completely randomly.

Pair Corralation between Doosan Fuel and Echomarketing CoLtd

Assuming the 90 days trading horizon Doosan Fuel Cell is expected to under-perform the Echomarketing CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, Doosan Fuel Cell is 1.25 times less risky than Echomarketing CoLtd. The stock trades about -0.04 of its potential returns per unit of risk. The Echomarketing CoLtd is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,003,000  in Echomarketing CoLtd on October 5, 2024 and sell it today you would lose (20,000) from holding Echomarketing CoLtd or give up 1.99% of portfolio value over 90 days.

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

Doosan Fuel Cell  vs.  Echomarketing CoLtd

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.

Echomarketing CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Doosan Fuel Cell and Echomarketing CoLtd 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.