Correlation Between ABCO Electronics and Doosan Fuel
Can any of the company-specific risk be diversified away by investing in both ABCO Electronics 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 ABCO Electronics and Doosan Fuel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABCO Electronics Co and Doosan Fuel Cell, you can compare the effects of market volatilities on ABCO Electronics 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 ABCO Electronics with a short position of Doosan Fuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABCO Electronics and Doosan Fuel.
Diversification Opportunities for ABCO Electronics and Doosan Fuel
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ABCO and Doosan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ABCO Electronics Co 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 ABCO Electronics 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 ABCO Electronics Co 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 ABCO Electronics i.e., ABCO Electronics and Doosan Fuel go up and down completely randomly.
Pair Corralation between ABCO Electronics and Doosan Fuel
Assuming the 90 days trading horizon ABCO Electronics Co is expected to under-perform the Doosan Fuel. But the stock apears to be less risky and, when comparing its historical volatility, ABCO Electronics Co is 1.01 times less risky than Doosan Fuel. The stock trades about -0.14 of its potential returns per unit of risk. The Doosan Fuel Cell is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 2,205,000 in Doosan Fuel Cell on September 14, 2024 and sell it today you would lose (473,000) from holding Doosan Fuel Cell or give up 21.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABCO Electronics Co vs. Doosan Fuel Cell
Performance |
| Timeline |
| ABCO Electronics |
| Doosan Fuel Cell |
ABCO Electronics and Doosan Fuel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABCO Electronics and Doosan Fuel
The main advantage of trading using opposite ABCO Electronics and Doosan Fuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABCO Electronics 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.| ABCO Electronics vs. Cube Entertainment | ABCO Electronics vs. Dreamus Company | ABCO Electronics vs. LG Energy Solution | ABCO Electronics vs. Dongwon System |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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