Correlation Between Gyeongnam Steel and Poongsan
Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel and Poongsan 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 Gyeongnam Steel and Poongsan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gyeongnam Steel Co and Poongsan, you can compare the effects of market volatilities on Gyeongnam Steel and Poongsan 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 Gyeongnam Steel with a short position of Poongsan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and Poongsan.
Diversification Opportunities for Gyeongnam Steel and Poongsan
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Gyeongnam and Poongsan is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Poongsan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poongsan and Gyeongnam Steel 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 Gyeongnam Steel Co are associated (or correlated) with Poongsan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poongsan has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and Poongsan go up and down completely randomly.
Pair Corralation between Gyeongnam Steel and Poongsan
Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 3.03 times more return on investment than Poongsan. However, Gyeongnam Steel is 3.03 times more volatile than Poongsan. It trades about 0.31 of its potential returns per unit of risk. Poongsan is currently generating about 0.02 per unit of risk. If you would invest 296,500 in Gyeongnam Steel Co on September 27, 2024 and sell it today you would earn a total of 217,500 from holding Gyeongnam Steel Co or generate 73.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gyeongnam Steel Co vs. Poongsan
Performance |
| Timeline |
| Gyeongnam Steel |
| Poongsan |
Gyeongnam Steel and Poongsan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gyeongnam Steel and Poongsan
The main advantage of trading using opposite Gyeongnam Steel and Poongsan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gyeongnam Steel position performs unexpectedly, Poongsan 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 Poongsan will offset losses from the drop in Poongsan's long position.| Gyeongnam Steel vs. Keum Kang Steel | Gyeongnam Steel vs. Tplex Co | Gyeongnam Steel vs. PJ Metal Co | Gyeongnam Steel vs. Samhyun Steel Co |
| Poongsan vs. LG Chemicals | Poongsan vs. POSCO Holdings | Poongsan vs. Hanwha Solutions | Poongsan vs. Lotte Chemical Corp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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