Correlation Between POSCO M and Korea Steel
Can any of the company-specific risk be diversified away by investing in both POSCO M and Korea 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 M and Korea Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO M TECH Co and Korea Steel Co, you can compare the effects of market volatilities on POSCO M and Korea 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 M with a short position of Korea Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO M and Korea Steel.
Diversification Opportunities for POSCO M and Korea Steel
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between POSCO and Korea is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding POSCO M TECH Co and Korea Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Steel and POSCO M 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 M TECH Co are associated (or correlated) with Korea Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Steel has no effect on the direction of POSCO M i.e., POSCO M and Korea Steel go up and down completely randomly.
Pair Corralation between POSCO M and Korea Steel
Assuming the 90 days trading horizon POSCO M TECH Co is expected to under-perform the Korea Steel. In addition to that, POSCO M is 1.73 times more volatile than Korea Steel Co. It trades about -0.22 of its total potential returns per unit of risk. Korea Steel Co is currently generating about -0.25 per unit of volatility. If you would invest 154,600 in Korea Steel Co on September 1, 2024 and sell it today you would lose (13,800) from holding Korea Steel Co or give up 8.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO M TECH Co vs. Korea Steel Co
Performance |
| Timeline |
| POSCO M TECH |
| Korea Steel |
POSCO M and Korea Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO M and Korea Steel
The main advantage of trading using opposite POSCO M and Korea Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO M position performs unexpectedly, Korea 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 Korea Steel will offset losses from the drop in Korea Steel's long position.| POSCO M vs. LG Chemicals | POSCO M vs. POSCO Holdings | POSCO M vs. Hanwha Solutions | POSCO M vs. Hyundai Steel |
| Korea Steel vs. PJ Electronics Co | Korea Steel vs. Kukil Metal Co | Korea Steel vs. Dongwon Metal Co | Korea Steel vs. Heungkuk Metaltech CoLtd |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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