Correlation Between Ford and Doosan Co

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

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

Diversification Opportunities for Ford and Doosan Co

-0.14

Correlation Coefficient

Ford  Doosan Co

Good diversification

The 3 months correlation between Ford and Doosan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Doosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Co and Ford 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 Ford Motor are associated (or correlated) with Doosan Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Co has no effect on the direction of Ford i.e., Ford and Doosan Co go up and down completely randomly.

Pair Corralation between Ford and Doosan Co

Taking into account the 90-day investment horizon Ford is expected to generate 5.73 times less return on investment than Doosan Co. But when comparing it to its historical volatility, Ford Motor is 2.01 times less risky than Doosan Co. It trades about 0.05 of its potential returns per unit of risk. Doosan Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10,450,000  in Doosan Co on December 20, 2024 and sell it today you would earn a total of  3,150,000  from holding Doosan Co or generate 30.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Ford Motor  vs.  Doosan Co

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Doosan Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Doosan Co

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

The idea behind Ford Motor and Doosan Co 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.