Correlation Between POSCO M and FNSTech
Can any of the company-specific risk be diversified away by investing in both POSCO M and FNSTech 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 FNSTech 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 FNSTech Co, you can compare the effects of market volatilities on POSCO M and FNSTech 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 FNSTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO M and FNSTech.
Diversification Opportunities for POSCO M and FNSTech
Poor diversification
The 3 months correlation between POSCO and FNSTech is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding POSCO M TECH Co and FNSTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNSTech 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 FNSTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNSTech has no effect on the direction of POSCO M i.e., POSCO M and FNSTech go up and down completely randomly.
Pair Corralation between POSCO M and FNSTech
Assuming the 90 days trading horizon POSCO M TECH Co is expected to under-perform the FNSTech. But the stock apears to be less risky and, when comparing its historical volatility, POSCO M TECH Co is 1.38 times less risky than FNSTech. The stock trades about -0.1 of its potential returns per unit of risk. The FNSTech Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,133,000 in FNSTech Co on August 25, 2024 and sell it today you would lose (229,000) from holding FNSTech Co or give up 20.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.07% |
| Values | Daily Returns |
POSCO M TECH Co vs. FNSTech Co
Performance |
| Timeline |
| POSCO M TECH |
| FNSTech |
POSCO M and FNSTech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO M and FNSTech
The main advantage of trading using opposite POSCO M and FNSTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO M position performs unexpectedly, FNSTech 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 FNSTech will offset losses from the drop in FNSTech's long position.| POSCO M vs. LG Chemicals | POSCO M vs. Lotte Chemical Corp | POSCO M vs. Hyundai Steel | POSCO M vs. Dongkuk Steel Mill |
| FNSTech vs. Samsung Electronics Co | FNSTech vs. Samsung Electronics Co | FNSTech vs. LG Energy Solution | FNSTech vs. SK Hynix |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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