Correlation Between Doosan Fuel and Lotte Data

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

Diversification Opportunities for Doosan Fuel and Lotte Data

0.42

Correlation Coefficient

Doosan Fuel  Lotte Data

Very weak diversification

The 3 months correlation between Doosan and Lotte is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Fuel Cell and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication 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 Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of Doosan Fuel i.e., Doosan Fuel and Lotte Data go up and down completely randomly.

Pair Corralation between Doosan Fuel and Lotte Data

Assuming the 90 days trading horizon Doosan Fuel Cell is expected to under-perform the Lotte Data. In addition to that, Doosan Fuel is 1.35 times more volatile than Lotte Data Communication. It trades about -0.04 of its total potential returns per unit of risk. Lotte Data Communication is currently generating about 0.0 per unit of volatility. If you would invest  1,868,761  in Lotte Data Communication on December 29, 2024 and sell it today you would lose (8,761) from holding Lotte Data Communication or give up 0.47% of portfolio value over 90 days.

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

Doosan Fuel Cell  vs.  Lotte Data Communication

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.

Lotte Data Communication

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Doosan Fuel Cell and Lotte Data Communication 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.