Correlation Between POSCO Holdings and BP PLC
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and BP PLC 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 BP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and BP PLC DZ1, you can compare the effects of market volatilities on POSCO Holdings and BP PLC 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 BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and BP PLC.
Diversification Opportunities for POSCO Holdings and BP PLC
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between POSCO and BPE is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and BP PLC DZ1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC DZ1 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 BP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP PLC DZ1 has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and BP PLC go up and down completely randomly.
Pair Corralation between POSCO Holdings and BP PLC
Assuming the 90 days horizon POSCO Holdings is expected to generate 1.25 times more return on investment than BP PLC. However, POSCO Holdings is 1.25 times more volatile than BP PLC DZ1. It trades about 0.12 of its potential returns per unit of risk. BP PLC DZ1 is currently generating about 0.12 per unit of risk. If you would invest 4,220 in POSCO Holdings on December 1, 2024 and sell it today you would earn a total of 280.00 from holding POSCO Holdings or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. BP PLC DZ1
Performance |
| Timeline |
| POSCO Holdings |
| BP PLC DZ1 |
POSCO Holdings and BP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and BP PLC
The main advantage of trading using opposite POSCO Holdings and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, BP PLC 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 BP PLC will offset losses from the drop in BP PLC's long position.| POSCO Holdings vs. T MOBILE US | POSCO Holdings vs. Keck Seng Investments | POSCO Holdings vs. Verizon Communications | POSCO Holdings vs. Tower One Wireless |
| BP PLC vs. LG Electronics | BP PLC vs. STORE ELECTRONIC | BP PLC vs. IBU tec advanced materials | BP PLC vs. Plastic Omnium |
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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