Correlation Between Posco ICT and Industrial Bank
Can any of the company-specific risk be diversified away by investing in both Posco ICT and Industrial Bank 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 ICT and Industrial Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Posco ICT and Industrial Bank, you can compare the effects of market volatilities on Posco ICT and Industrial Bank 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 ICT with a short position of Industrial Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Posco ICT and Industrial Bank.
Diversification Opportunities for Posco ICT and Industrial Bank
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Posco and Industrial is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Posco ICT and Industrial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank and Posco ICT 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 ICT are associated (or correlated) with Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of Posco ICT i.e., Posco ICT and Industrial Bank go up and down completely randomly.
Pair Corralation between Posco ICT and Industrial Bank
Assuming the 90 days trading horizon Posco ICT is expected to under-perform the Industrial Bank. In addition to that, Posco ICT is 3.35 times more volatile than Industrial Bank. It trades about -0.46 of its total potential returns per unit of risk. Industrial Bank is currently generating about 0.27 per unit of volatility. If you would invest 1,436,000 in Industrial Bank on September 5, 2024 and sell it today you would earn a total of 81,000 from holding Industrial Bank or generate 5.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Posco ICT vs. Industrial Bank
Performance |
| Timeline |
| Posco ICT |
| Industrial Bank |
Posco ICT and Industrial Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Posco ICT and Industrial Bank
The main advantage of trading using opposite Posco ICT and Industrial Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Posco ICT position performs unexpectedly, Industrial Bank 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 Industrial Bank will offset losses from the drop in Industrial Bank's long position.| Posco ICT vs. SFA Engineering | Posco ICT vs. CJ ENM | Posco ICT vs. Paradise Co | Posco ICT vs. Seoul Semiconductor Co |
| Industrial Bank vs. Dongjin Semichem Co | Industrial Bank vs. AhnLab Inc | Industrial Bank vs. Posco ICT | Industrial Bank vs. CJ ENM |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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