Correlation Between Shinhan WTI and Doosan Bobcat

Can any of the company-specific risk be diversified away by investing in both Shinhan WTI and Doosan Bobcat 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 Shinhan WTI and Doosan Bobcat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shinhan WTI Futures and Doosan Bobcat, you can compare the effects of market volatilities on Shinhan WTI and Doosan Bobcat 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 Shinhan WTI with a short position of Doosan Bobcat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan WTI and Doosan Bobcat.

Diversification Opportunities for Shinhan WTI and Doosan Bobcat

0.03

Correlation Coefficient

Shinhan WTI  Doosan Bobcat

Significant diversification

The 3 months correlation between Shinhan and Doosan is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and Doosan Bobcat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Bobcat and Shinhan WTI 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 Shinhan WTI Futures are associated (or correlated) with Doosan Bobcat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Bobcat has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and Doosan Bobcat go up and down completely randomly.

Pair Corralation between Shinhan WTI and Doosan Bobcat

Assuming the 90 days trading horizon Shinhan WTI Futures is expected to under-perform the Doosan Bobcat. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan WTI Futures is 2.47 times less risky than Doosan Bobcat. The stock trades about -0.04 of its potential returns per unit of risk. The Doosan Bobcat is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  3,710,000  in Doosan Bobcat on September 23, 2024 and sell it today you would earn a total of  1,010,000  from holding Doosan Bobcat or generate 27.22% return on investment over 90 days.

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

Shinhan WTI Futures  vs.  Doosan Bobcat

Shinhan WTI Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinhan WTI Futures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinhan WTI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Doosan Bobcat

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Bobcat are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Bobcat sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan WTI and Doosan Bobcat

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

The idea behind Shinhan WTI Futures and Doosan Bobcat 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.