Correlation Between POSCO Holdings and Lotte Fine
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Lotte Fine 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 Lotte Fine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Lotte Fine Chemical, you can compare the effects of market volatilities on POSCO Holdings and Lotte Fine 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 Lotte Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Lotte Fine.
Diversification Opportunities for POSCO Holdings and Lotte Fine
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between POSCO and Lotte is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Lotte Fine Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Fine Chemical 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 Lotte Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Fine Chemical has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Lotte Fine go up and down completely randomly.
Pair Corralation between POSCO Holdings and Lotte Fine
Assuming the 90 days trading horizon POSCO Holdings is expected to generate 1.58 times more return on investment than Lotte Fine. However, POSCO Holdings is 1.58 times more volatile than Lotte Fine Chemical. It trades about -0.17 of its potential returns per unit of risk. Lotte Fine Chemical is currently generating about -0.52 per unit of risk. If you would invest 34,950,000 in POSCO Holdings on August 28, 2024 and sell it today you would lose (4,700,000) from holding POSCO Holdings or give up 13.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. Lotte Fine Chemical
Performance |
| Timeline |
| POSCO Holdings |
| Lotte Fine Chemical |
POSCO Holdings and Lotte Fine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and Lotte Fine
The main advantage of trading using opposite POSCO Holdings and Lotte Fine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Lotte Fine 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 Lotte Fine will offset losses from the drop in Lotte Fine'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 |
| Lotte Fine vs. LG Chemicals | Lotte Fine vs. Lotte Chemical Corp | Lotte Fine vs. Hyundai Steel | Lotte Fine vs. Seah Steel 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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