Correlation Between POSCO Holdings and Dongkuk Steel
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Dongkuk Steel 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 Holdings and Dongkuk Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Dongkuk Steel Mill, you can compare the effects of market volatilities on POSCO Holdings and Dongkuk Steel 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 Holdings with a short position of Dongkuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Dongkuk Steel.
Diversification Opportunities for POSCO Holdings and Dongkuk Steel
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between POSCO and Dongkuk is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Dongkuk Steel Mill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongkuk Steel Mill and POSCO Holdings 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 Holdings are associated (or correlated) with Dongkuk Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongkuk Steel Mill has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Dongkuk Steel go up and down completely randomly.
Pair Corralation between POSCO Holdings and Dongkuk Steel
Assuming the 90 days trading horizon POSCO Holdings is expected to under-perform the Dongkuk Steel. In addition to that, POSCO Holdings is 3.56 times more volatile than Dongkuk Steel Mill. It trades about -0.17 of its total potential returns per unit of risk. Dongkuk Steel Mill is currently generating about -0.28 per unit of volatility. If you would invest 797,000 in Dongkuk Steel Mill on August 29, 2024 and sell it today you would lose (48,000) from holding Dongkuk Steel Mill or give up 6.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. Dongkuk Steel Mill
Performance |
| Timeline |
| POSCO Holdings |
| Dongkuk Steel Mill |
POSCO Holdings and Dongkuk Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and Dongkuk Steel
The main advantage of trading using opposite POSCO Holdings and Dongkuk Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Dongkuk Steel 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 Dongkuk Steel will offset losses from the drop in Dongkuk Steel's long position.| POSCO Holdings vs. Top Material Co | POSCO Holdings vs. LS Materials | POSCO Holdings vs. Nable Communications | POSCO Holdings vs. SK Telecom Co |
| Dongkuk Steel vs. iNtRON Biotechnology | Dongkuk Steel vs. Korean Drug Co | Dongkuk Steel vs. Vitzro Tech Co | Dongkuk Steel vs. CU Tech Corp |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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