Correlation Between POSCO M and Lake Materials
Can any of the company-specific risk be diversified away by investing in both POSCO M and Lake Materials 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 Lake Materials 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 Lake Materials Co, you can compare the effects of market volatilities on POSCO M and Lake Materials 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 Lake Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO M and Lake Materials.
Diversification Opportunities for POSCO M and Lake Materials
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between POSCO and Lake is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding POSCO M TECH Co and Lake Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Materials 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 Lake Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Materials has no effect on the direction of POSCO M i.e., POSCO M and Lake Materials go up and down completely randomly.
Pair Corralation between POSCO M and Lake Materials
Assuming the 90 days trading horizon POSCO M TECH Co is expected to generate 0.88 times more return on investment than Lake Materials. However, POSCO M TECH Co is 1.13 times less risky than Lake Materials. It trades about -0.19 of its potential returns per unit of risk. Lake Materials Co is currently generating about -0.27 per unit of risk. If you would invest 1,575,000 in POSCO M TECH Co on August 25, 2024 and sell it today you would lose (184,000) from holding POSCO M TECH Co or give up 11.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO M TECH Co vs. Lake Materials Co
Performance |
| Timeline |
| POSCO M TECH |
| Lake Materials |
POSCO M and Lake Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO M and Lake Materials
The main advantage of trading using opposite POSCO M and Lake Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO M position performs unexpectedly, Lake Materials 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 Lake Materials will offset losses from the drop in Lake Materials' long position.| POSCO M vs. LG Chemicals | POSCO M vs. POSCO Holdings | POSCO M vs. Lotte Chemical Corp | POSCO M vs. Hyundai Steel |
| Lake Materials vs. Samsung Electronics Co | Lake Materials vs. Samsung Electronics Co | Lake Materials vs. LG Energy Solution | Lake Materials 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |