Correlation Between Dongwon System and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Dongwon System and POSCO Holdings 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 Dongwon System and POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongwon System and POSCO Holdings, you can compare the effects of market volatilities on Dongwon System and POSCO Holdings 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 Dongwon System with a short position of POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwon System and POSCO Holdings.
Diversification Opportunities for Dongwon System and POSCO Holdings
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dongwon and POSCO is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Dongwon System 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 Dongwon System are associated (or correlated) with POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Dongwon System i.e., Dongwon System and POSCO Holdings go up and down completely randomly.
Pair Corralation between Dongwon System and POSCO Holdings
Assuming the 90 days trading horizon Dongwon System is expected to generate 0.75 times more return on investment than POSCO Holdings. However, Dongwon System is 1.33 times less risky than POSCO Holdings. It trades about -0.13 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.17 per unit of risk. If you would invest 5,080,000 in Dongwon System on August 30, 2024 and sell it today you would lose (415,000) from holding Dongwon System or give up 8.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongwon System vs. POSCO Holdings
Performance |
| Timeline |
| Dongwon System |
| POSCO Holdings |
Dongwon System and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwon System and POSCO Holdings
The main advantage of trading using opposite Dongwon System and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwon System position performs unexpectedly, POSCO Holdings 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 POSCO Holdings will offset losses from the drop in POSCO Holdings' long position.| Dongwon System vs. InfoBank | Dongwon System vs. Shinhan Inverse Silver | Dongwon System vs. Incar Financial Service | Dongwon System vs. Shinhan Financial Group |
| POSCO Holdings vs. Hanwha Solutions | POSCO Holdings vs. Lotte Chemical Corp | POSCO Holdings vs. Hyundai Steel | POSCO Holdings vs. Ecopro Co |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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