Correlation Between CKH Food and Doosan Heavy

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

By analyzing existing cross correlation between CKH Food Health and Doosan Heavy Ind, you can compare the effects of market volatilities on CKH Food and Doosan Heavy 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 CKH Food with a short position of Doosan Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CKH Food and Doosan Heavy.

Diversification Opportunities for CKH Food and Doosan Heavy

0.08

Correlation Coefficient

CKH Food  Doosan Heavy

Significant diversification

The 3 months correlation between CKH and Doosan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CKH Food Health and Doosan Heavy Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Heavy Ind and CKH Food 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 CKH Food Health are associated (or correlated) with Doosan Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Heavy Ind has no effect on the direction of CKH Food i.e., CKH Food and Doosan Heavy go up and down completely randomly.

Pair Corralation between CKH Food and Doosan Heavy

Assuming the 90 days trading horizon CKH Food Health is expected to under-perform the Doosan Heavy. In addition to that, CKH Food is 1.21 times more volatile than Doosan Heavy Ind. It trades about -0.06 of its total potential returns per unit of risk. Doosan Heavy Ind is currently generating about 0.01 per unit of volatility. If you would invest  1,715,000  in Doosan Heavy Ind on October 4, 2024 and sell it today you would earn a total of  40,000  from holding Doosan Heavy Ind or generate 2.33% return on investment over 90 days.

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

CKH Food Health  vs.  Doosan Heavy Ind

CKH Food Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CKH Food Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Doosan Heavy Ind

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Heavy Ind are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Doosan Heavy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CKH Food and Doosan Heavy

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

The idea behind CKH Food Health and Doosan Heavy Ind 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.