Correlation Between GM and Doosan

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

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

Diversification Opportunities for GM and Doosan

-0.11

Correlation Coefficient

GM  Doosan

Good diversification

The 3 months correlation between GM and Doosan is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Doosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan and GM 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 General Motors are associated (or correlated) with Doosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan has no effect on the direction of GM i.e., GM and Doosan go up and down completely randomly.

Pair Corralation between GM and Doosan

Allowing for the 90-day total investment horizon GM is expected to generate 1.74 times less return on investment than Doosan. But when comparing it to its historical volatility, General Motors is 1.67 times less risky than Doosan. It trades about 0.04 of its potential returns per unit of risk. Doosan Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,049,757  in Doosan Co on October 23, 2024 and sell it today you would earn a total of  4,870,243  from holding Doosan Co or generate 60.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.58%
Values	Daily Returns

General Motors  vs.  Doosan Co

General Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Doosan

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Doosan Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Doosan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GM and Doosan

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

The idea behind General Motors 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.