Correlation Between POSCO Holdings and Hyundai
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Hyundai 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 Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Hyundai Motor, you can compare the effects of market volatilities on POSCO Holdings and Hyundai 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 Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Hyundai.
Diversification Opportunities for POSCO Holdings and Hyundai
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between POSCO and Hyundai is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor 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 Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Hyundai go up and down completely randomly.
Pair Corralation between POSCO Holdings and Hyundai
Assuming the 90 days trading horizon POSCO Holdings is expected to under-perform the Hyundai. In addition to that, POSCO Holdings is 1.64 times more volatile than Hyundai Motor. It trades about -0.17 of its total potential returns per unit of risk. Hyundai Motor is currently generating about -0.06 per unit of volatility. If you would invest 22,650,000 in Hyundai Motor on August 28, 2024 and sell it today you would lose (750,000) from holding Hyundai Motor or give up 3.31% 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. Hyundai Motor
Performance |
| Timeline |
| POSCO Holdings |
| Hyundai Motor |
POSCO Holdings and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and Hyundai
The main advantage of trading using opposite POSCO Holdings and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Hyundai 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 Hyundai will offset losses from the drop in Hyundai'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 |
| Hyundai vs. InnoTherapy | Hyundai vs. Sung Bo Chemicals | Hyundai vs. LG Chemicals | Hyundai vs. Namhae Chemical |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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