Correlation Between Formetal and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Formetal 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 Formetal and POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formetal Co and POSCO Holdings, you can compare the effects of market volatilities on Formetal 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 Formetal with a short position of POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and POSCO Holdings.
Diversification Opportunities for Formetal and POSCO Holdings
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formetal and POSCO is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Formetal 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 Formetal Co 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 Formetal i.e., Formetal and POSCO Holdings go up and down completely randomly.
Pair Corralation between Formetal and POSCO Holdings
Assuming the 90 days trading horizon Formetal Co is expected to generate 1.42 times more return on investment than POSCO Holdings. However, Formetal is 1.42 times more volatile than POSCO Holdings. It trades about 0.12 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.16 per unit of risk. If you would invest 278,358 in Formetal Co on November 1, 2024 and sell it today you would earn a total of 102,142 from holding Formetal Co or generate 36.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formetal Co vs. POSCO Holdings
Performance |
| Timeline |
| Formetal |
| POSCO Holdings |
Formetal and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formetal and POSCO Holdings
The main advantage of trading using opposite Formetal and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal 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.| Formetal vs. Puloon Technology | Formetal vs. Display Tech Co | Formetal vs. Alton Sports CoLtd | Formetal vs. PlayD Co |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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