Correlation Between POSCO Holdings and Dong-A Steel
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Dong-A 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 Dong-A 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 Dong A Steel Technology, you can compare the effects of market volatilities on POSCO Holdings and Dong-A 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 Dong-A Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Dong-A Steel.
Diversification Opportunities for POSCO Holdings and Dong-A Steel
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between POSCO and Dong-A is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Dong A Steel Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Steel 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 Dong-A Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Steel has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Dong-A Steel go up and down completely randomly.
Pair Corralation between POSCO Holdings and Dong-A Steel
Assuming the 90 days trading horizon POSCO Holdings is expected to under-perform the Dong-A Steel. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.35 times less risky than Dong-A Steel. The stock trades about -0.09 of its potential returns per unit of risk. The Dong A Steel Technology is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 433,000 in Dong A Steel Technology on September 12, 2024 and sell it today you would lose (145,500) from holding Dong A Steel Technology or give up 33.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. Dong A Steel Technology
Performance |
| Timeline |
| POSCO Holdings |
| Dong A Steel |
POSCO Holdings and Dong-A Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and Dong-A Steel
The main advantage of trading using opposite POSCO Holdings and Dong-A Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Dong-A 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 Dong-A Steel will offset losses from the drop in Dong-A Steel's long position.| POSCO Holdings vs. LG Chemicals | POSCO Holdings vs. Hanwha Solutions | POSCO Holdings vs. Lotte Chemical Corp | POSCO Holdings vs. Hyundai Steel |
| Dong-A Steel vs. Samsung Electronics Co | Dong-A Steel vs. Samsung Electronics Co | Dong-A Steel vs. SK Hynix | Dong-A Steel vs. POSCO Holdings |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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