Correlation Between POSCO Holdings and BASF SE
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and BASF SE 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 BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and BASF SE, you can compare the effects of market volatilities on POSCO Holdings and BASF SE 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 BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and BASF SE.
Diversification Opportunities for POSCO Holdings and BASF SE
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between POSCO and BASF is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and BASF SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and BASF SE go up and down completely randomly.
Pair Corralation between POSCO Holdings and BASF SE
Assuming the 90 days horizon POSCO Holdings is expected to under-perform the BASF SE. In addition to that, POSCO Holdings is 1.38 times more volatile than BASF SE. It trades about -0.18 of its total potential returns per unit of risk. BASF SE is currently generating about -0.17 per unit of volatility. If you would invest 4,585 in BASF SE on August 29, 2024 and sell it today you would lose (355.00) from holding BASF SE or give up 7.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. BASF SE
Performance |
| Timeline |
| POSCO Holdings |
| BASF SE |
POSCO Holdings and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and BASF SE
The main advantage of trading using opposite POSCO Holdings and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE's long position.| POSCO Holdings vs. Taiwan Semiconductor Manufacturing | POSCO Holdings vs. Selective Insurance Group | POSCO Holdings vs. Insurance Australia Group | POSCO Holdings vs. ZURICH INSURANCE GROUP |
| BASF SE vs. GLG LIFE TECH | BASF SE vs. PKSHA TECHNOLOGY INC | BASF SE vs. BioNTech SE | BASF SE vs. PT Indofood Sukses |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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