Correlation Between Seah Steel and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Seah Steel and POSCO 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 Seah Steel and POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seah Steel Corp and POSCO Holdings, you can compare the effects of market volatilities on Seah Steel and POSCO 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 Seah Steel with a short position of POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seah Steel and POSCO Holdings.
Diversification Opportunities for Seah Steel and POSCO Holdings
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Seah and POSCO is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Seah Steel Corp and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Seah Steel 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 Seah Steel Corp are associated (or correlated) with POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Seah Steel i.e., Seah Steel and POSCO Holdings go up and down completely randomly.
Pair Corralation between Seah Steel and POSCO Holdings
Assuming the 90 days trading horizon Seah Steel Corp is expected to generate 0.89 times more return on investment than POSCO Holdings. However, Seah Steel Corp is 1.13 times less risky than POSCO Holdings. It trades about 0.1 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.17 per unit of risk. If you would invest 16,290,000 in Seah Steel Corp on August 29, 2024 and sell it today you would earn a total of 1,010,000 from holding Seah Steel Corp or generate 6.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seah Steel Corp vs. POSCO Holdings
Performance |
| Timeline |
| Seah Steel Corp |
| POSCO Holdings |
Seah Steel and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seah Steel and POSCO Holdings
The main advantage of trading using opposite Seah Steel and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seah Steel position performs unexpectedly, POSCO 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 POSCO Holdings will offset losses from the drop in POSCO Holdings' long position.The idea behind Seah Steel Corp and POSCO Holdings 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.| POSCO Holdings vs. Top Material Co | POSCO Holdings vs. LS Materials | POSCO Holdings vs. Nable Communications | POSCO Holdings vs. SK Telecom Co |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |