Correlation Between Posco Chemical and Shinhan WTI
Can any of the company-specific risk be diversified away by investing in both Posco Chemical and Shinhan WTI 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 Posco Chemical and Shinhan WTI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Posco Chemical Co and Shinhan WTI Futures, you can compare the effects of market volatilities on Posco Chemical and Shinhan WTI 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 Posco Chemical with a short position of Shinhan WTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Posco Chemical and Shinhan WTI.
Diversification Opportunities for Posco Chemical and Shinhan WTI
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Posco and Shinhan is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Posco Chemical Co and Shinhan WTI Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan WTI Futures and Posco Chemical 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 Posco Chemical Co are associated (or correlated) with Shinhan WTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan WTI Futures has no effect on the direction of Posco Chemical i.e., Posco Chemical and Shinhan WTI go up and down completely randomly.
Pair Corralation between Posco Chemical and Shinhan WTI
Assuming the 90 days trading horizon Posco Chemical Co is expected to under-perform the Shinhan WTI. In addition to that, Posco Chemical is 2.21 times more volatile than Shinhan WTI Futures. It trades about -0.21 of its total potential returns per unit of risk. Shinhan WTI Futures is currently generating about -0.08 per unit of volatility. If you would invest 764,500 in Shinhan WTI Futures on September 13, 2024 and sell it today you would lose (44,000) from holding Shinhan WTI Futures or give up 5.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.35% |
| Values | Daily Returns |
Posco Chemical Co vs. Shinhan WTI Futures
Performance |
| Timeline |
| Posco Chemical |
| Shinhan WTI Futures |
Posco Chemical and Shinhan WTI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Posco Chemical and Shinhan WTI
The main advantage of trading using opposite Posco Chemical and Shinhan WTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Posco Chemical position performs unexpectedly, Shinhan WTI 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 Shinhan WTI will offset losses from the drop in Shinhan WTI's long position.| Posco Chemical vs. Dong A Steel Technology | Posco Chemical vs. Netmarble Games Corp | Posco Chemical vs. Guyoung Technology Co | Posco Chemical vs. Hwangkum Steel Technology |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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