Correlation Between Doosan Fuel and Simmtech Holdings

Can any of the company-specific risk be diversified away by investing in both Doosan Fuel and Simmtech Holdings 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 Simmtech Holdings 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 Simmtech Holdings Co, you can compare the effects of market volatilities on Doosan Fuel and Simmtech Holdings 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 Simmtech Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Doosan Fuel and Simmtech Holdings.

Diversification Opportunities for Doosan Fuel and Simmtech Holdings

0.7

Correlation Coefficient

Doosan Fuel  Simmtech Holdings

Poor diversification

The 3 months correlation between Doosan and Simmtech is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Fuel Cell and Simmtech Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simmtech Holdings 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 Simmtech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simmtech Holdings has no effect on the direction of Doosan Fuel i.e., Doosan Fuel and Simmtech Holdings go up and down completely randomly.

Pair Corralation between Doosan Fuel and Simmtech Holdings

Assuming the 90 days trading horizon Doosan Fuel Cell is expected to generate 2.01 times more return on investment than Simmtech Holdings. However, Doosan Fuel is 2.01 times more volatile than Simmtech Holdings Co. It trades about -0.01 of its potential returns per unit of risk. Simmtech Holdings Co is currently generating about -0.39 per unit of risk. If you would invest  1,765,000  in Doosan Fuel Cell on September 5, 2024 and sell it today you would lose (102,000) from holding Doosan Fuel Cell or give up 5.78% of portfolio value over 90 days.

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

Doosan Fuel Cell  vs.  Simmtech Holdings Co

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.

Simmtech Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simmtech Holdings Co 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Doosan Fuel and Simmtech Holdings

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

The idea behind Doosan Fuel Cell and Simmtech Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.