Correlation Between Next Entertainment and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Next Entertainment 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 Next Entertainment and POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Next Entertainment World and POSCO Holdings, you can compare the effects of market volatilities on Next Entertainment 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 Next Entertainment with a short position of POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next Entertainment and POSCO Holdings.
Diversification Opportunities for Next Entertainment and POSCO Holdings
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Next and POSCO is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Next Entertainment World and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Next Entertainment 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 Next Entertainment World 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 Next Entertainment i.e., Next Entertainment and POSCO Holdings go up and down completely randomly.
Pair Corralation between Next Entertainment and POSCO Holdings
Assuming the 90 days trading horizon Next Entertainment World is expected to under-perform the POSCO Holdings. In addition to that, Next Entertainment is 1.06 times more volatile than POSCO Holdings. It trades about -0.08 of its total potential returns per unit of risk. POSCO Holdings is currently generating about 0.01 per unit of volatility. If you would invest 29,006,800 in POSCO Holdings on October 16, 2024 and sell it today you would lose (3,306,800) from holding POSCO Holdings or give up 11.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Next Entertainment World vs. POSCO Holdings
Performance |
| Timeline |
| Next Entertainment World |
| POSCO Holdings |
Next Entertainment and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Next Entertainment and POSCO Holdings
The main advantage of trading using opposite Next Entertainment and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Next Entertainment 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.| Next Entertainment vs. Heungkuk Metaltech CoLtd | Next Entertainment vs. iNtRON Biotechnology | Next Entertainment vs. Dongbang Transport Logistics | Next Entertainment vs. ENF Technology Co |
| POSCO Holdings vs. Next Entertainment World | POSCO Holdings vs. DB Financial Investment | POSCO Holdings vs. Air Busan Co | POSCO Holdings vs. Pureun Mutual Savings |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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