Correlation Between Doosan Fuel and TOP Engineering

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

Diversification Opportunities for Doosan Fuel and TOP Engineering

-0.34

Correlation Coefficient

Doosan Fuel  TOP Engineering

Very good diversification

The 3 months correlation between Doosan and TOP is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Doosan Fuel Cell and TOP Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOP Engineering 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 TOP Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOP Engineering has no effect on the direction of Doosan Fuel i.e., Doosan Fuel and TOP Engineering go up and down completely randomly.

Pair Corralation between Doosan Fuel and TOP Engineering

Assuming the 90 days trading horizon Doosan Fuel Cell is expected to under-perform the TOP Engineering. In addition to that, Doosan Fuel is 1.32 times more volatile than TOP Engineering Co. It trades about -0.01 of its total potential returns per unit of risk. TOP Engineering Co is currently generating about 0.05 per unit of volatility. If you would invest  412,000  in TOP Engineering Co on September 13, 2024 and sell it today you would earn a total of  24,500  from holding TOP Engineering Co or generate 5.95% 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.  TOP Engineering 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.

TOP Engineering

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TOP Engineering Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TOP Engineering may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Doosan Fuel and TOP Engineering

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

The idea behind Doosan Fuel Cell and TOP Engineering 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 Transaction History module to view history of all your transactions and understand their impact on performance.