Correlation Between Doosan Fuel and Kmw

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

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

Diversification Opportunities for Doosan Fuel and Kmw

-0.36

Correlation Coefficient

Doosan Fuel  Kmw

Very good diversification

The 3 months correlation between Doosan and Kmw is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Fuel Cell and Kmw Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kmw Inc and Doosan Fuel 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 Doosan Fuel Cell are associated (or correlated) with Kmw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kmw Inc has no effect on the direction of Doosan Fuel i.e., Doosan Fuel and Kmw go up and down completely randomly.

Pair Corralation between Doosan Fuel and Kmw

Assuming the 90 days trading horizon Doosan Fuel Cell is expected to under-perform the Kmw. In addition to that, Doosan Fuel is 1.04 times more volatile than Kmw Inc. It trades about -0.01 of its total potential returns per unit of risk. Kmw Inc is currently generating about 0.07 per unit of volatility. If you would invest  720,000  in Kmw Inc on September 5, 2024 and sell it today you would earn a total of  74,000  from holding Kmw Inc or generate 10.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Doosan Fuel Cell  vs.  Kmw Inc

Doosan Fuel Cell

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kmw Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kmw Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kmw sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Doosan Fuel and Kmw

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

The idea behind Doosan Fuel Cell and Kmw Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .