Correlation Between POSCO Holdings and EURODRY
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and EURODRY 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 POSCO Holdings and EURODRY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and EURODRY LTD DL, you can compare the effects of market volatilities on POSCO Holdings and EURODRY 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 POSCO Holdings with a short position of EURODRY. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and EURODRY.
Diversification Opportunities for POSCO Holdings and EURODRY
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between POSCO and EURODRY is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and EURODRY LTD DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EURODRY LTD DL and POSCO Holdings 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 POSCO Holdings are associated (or correlated) with EURODRY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EURODRY LTD DL has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and EURODRY go up and down completely randomly.
Pair Corralation between POSCO Holdings and EURODRY
Assuming the 90 days horizon POSCO Holdings is expected to generate 0.75 times more return on investment than EURODRY. However, POSCO Holdings is 1.34 times less risky than EURODRY. It trades about -0.21 of its potential returns per unit of risk. EURODRY LTD DL is currently generating about -0.2 per unit of risk. If you would invest 5,700 in POSCO Holdings on August 30, 2024 and sell it today you would lose (740.00) from holding POSCO Holdings or give up 12.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. EURODRY LTD DL
Performance |
| Timeline |
| POSCO Holdings |
| EURODRY LTD DL |
POSCO Holdings and EURODRY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and EURODRY
The main advantage of trading using opposite POSCO Holdings and EURODRY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, EURODRY 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 EURODRY will offset losses from the drop in EURODRY's long position.| POSCO Holdings vs. Clearside Biomedical | POSCO Holdings vs. Major Drilling Group | POSCO Holdings vs. Japan Medical Dynamic | POSCO Holdings vs. Hitachi Construction Machinery |
| EURODRY vs. SEALED AIR | EURODRY vs. Ryanair Holdings plc | EURODRY vs. National Bank Holdings | EURODRY vs. Pentair plc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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