Correlation Between LS Electric and Doosan Fuel
Can any of the company-specific risk be diversified away by investing in both LS Electric and Doosan Fuel 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 LS Electric and Doosan Fuel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LS Electric and Doosan Fuel Cell, you can compare the effects of market volatilities on LS Electric and Doosan Fuel 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 LS Electric with a short position of Doosan Fuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of LS Electric and Doosan Fuel.
Diversification Opportunities for LS Electric and Doosan Fuel
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 010120 and Doosan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding LS Electric and Doosan Fuel Cell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doosan Fuel Cell and LS Electric 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 LS Electric are associated (or correlated) with Doosan Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doosan Fuel Cell has no effect on the direction of LS Electric i.e., LS Electric and Doosan Fuel go up and down completely randomly.
Pair Corralation between LS Electric and Doosan Fuel
Assuming the 90 days trading horizon LS Electric is expected to generate 1.59 times more return on investment than Doosan Fuel. However, LS Electric is 1.59 times more volatile than Doosan Fuel Cell. It trades about -0.04 of its potential returns per unit of risk. Doosan Fuel Cell is currently generating about -0.07 per unit of risk. If you would invest 21,350,000 in LS Electric on August 29, 2024 and sell it today you would lose (6,820,000) from holding LS Electric or give up 31.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LS Electric vs. Doosan Fuel Cell
Performance |
| Timeline |
| LS Electric |
| Doosan Fuel Cell |
LS Electric and Doosan Fuel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LS Electric and Doosan Fuel
The main advantage of trading using opposite LS Electric and Doosan Fuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LS Electric position performs unexpectedly, Doosan Fuel 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 Fuel will offset losses from the drop in Doosan Fuel's long position.| LS Electric vs. Samsung Electronics Co | LS Electric vs. Samsung Electronics Co | LS Electric vs. KB Financial Group | LS Electric vs. Shinhan Financial Group |
| Doosan Fuel vs. LS Electric | Doosan Fuel vs. Busan Industrial Co | Doosan Fuel vs. Busan Ind | Doosan Fuel vs. Mirae Asset Daewoo |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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