Correlation Between Commercial Metals and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Commercial Metals 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 Commercial Metals and POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commercial Metals and POSCO Holdings, you can compare the effects of market volatilities on Commercial Metals 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 Commercial Metals with a short position of POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Metals and POSCO Holdings.
Diversification Opportunities for Commercial Metals and POSCO Holdings
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Commercial and POSCO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Metals and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Commercial Metals 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 Commercial 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 Commercial Metals i.e., Commercial Metals and POSCO Holdings go up and down completely randomly.
Pair Corralation between Commercial Metals and POSCO Holdings
Considering the 90-day investment horizon Commercial Metals is expected to generate 1.21 times more return on investment than POSCO Holdings. However, Commercial Metals is 1.21 times more volatile than POSCO Holdings. It trades about -0.05 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.19 per unit of risk. If you would invest 5,424 in Commercial Metals on November 1, 2024 and sell it today you would lose (525.00) from holding Commercial Metals or give up 9.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commercial Metals vs. POSCO Holdings
Performance |
| Timeline |
| Commercial Metals |
| POSCO Holdings |
Commercial Metals and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commercial Metals and POSCO Holdings
The main advantage of trading using opposite Commercial Metals and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Metals 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.| Commercial Metals vs. Olympic Steel | Commercial Metals vs. Steel Dynamics | Commercial Metals vs. Nucor Corp | Commercial Metals vs. Universal Stainless Alloy |
| POSCO Holdings vs. Olympic Steel | POSCO Holdings vs. Universal Stainless Alloy | POSCO Holdings vs. Outokumpu Oyj ADR | POSCO Holdings vs. Ternium SA ADR |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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