Correlation Between Daejung Chemicals and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals 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 Daejung Chemicals and POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daejung Chemicals Metals and POSCO Holdings, you can compare the effects of market volatilities on Daejung Chemicals 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 Daejung Chemicals with a short position of POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and POSCO Holdings.
Diversification Opportunities for Daejung Chemicals and POSCO Holdings
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Daejung and POSCO is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Daejung Chemicals 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 Daejung Chemicals Metals 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 Daejung Chemicals i.e., Daejung Chemicals and POSCO Holdings go up and down completely randomly.
Pair Corralation between Daejung Chemicals and POSCO Holdings
Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to generate 0.5 times more return on investment than POSCO Holdings. However, Daejung Chemicals Metals is 2.01 times less risky than POSCO Holdings. It trades about -0.21 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.13 per unit of risk. If you would invest 1,509,000 in Daejung Chemicals Metals on September 2, 2024 and sell it today you would lose (248,000) from holding Daejung Chemicals Metals or give up 16.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejung Chemicals Metals vs. POSCO Holdings
Performance |
| Timeline |
| Daejung Chemicals Metals |
| POSCO Holdings |
Daejung Chemicals and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejung Chemicals and POSCO Holdings
The main advantage of trading using opposite Daejung Chemicals and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals 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.| Daejung Chemicals vs. Miwon Chemicals Co | Daejung Chemicals vs. Display Tech Co | Daejung Chemicals vs. Sung Bo Chemicals | Daejung Chemicals vs. Iljin Display |
| POSCO Holdings vs. Ssangyong Information Communication | POSCO Holdings vs. Daejoo Electronic Materials | POSCO Holdings vs. EV Advanced Material | POSCO Holdings vs. Daishin Information Communications |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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