Correlation Between Kosdaq Composite and Doosan

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

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

Diversification Opportunities for Kosdaq Composite and Doosan

-0.46

Correlation Coefficient

Kosdaq Composite  Doosan

Very good diversification

The 3 months correlation between Kosdaq and Doosan is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and Doosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan and Kosdaq Composite 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 Kosdaq Composite Index 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 Kosdaq Composite i.e., Kosdaq Composite and Doosan go up and down completely randomly.

Pair Corralation between Kosdaq Composite and Doosan

Assuming the 90 days trading horizon Kosdaq Composite is expected to generate 1.9 times less return on investment than Doosan. But when comparing it to its historical volatility, Kosdaq Composite Index is 1.87 times less risky than Doosan. It trades about 0.4 of its potential returns per unit of risk. Doosan Co is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  9,230,000  in Doosan Co on October 9, 2024 and sell it today you would earn a total of  2,650,000  from holding Doosan Co or generate 28.71% return on investment over 90 days.

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

Kosdaq Composite Index  vs.  Doosan Co

Pair Trading with Kosdaq Composite and Doosan

The main advantage of trading using opposite Kosdaq Composite and Doosan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kosdaq Composite 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 Kosdaq Composite Index 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.