Correlation Between POSCO Holdings and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Sumitomo Chemical 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 Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Sumitomo Chemical, you can compare the effects of market volatilities on POSCO Holdings and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Sumitomo Chemical.
Diversification Opportunities for POSCO Holdings and Sumitomo Chemical
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between POSCO and Sumitomo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between POSCO Holdings and Sumitomo Chemical
Assuming the 90 days horizon POSCO Holdings is expected to under-perform the Sumitomo Chemical. In addition to that, POSCO Holdings is 2.16 times more volatile than Sumitomo Chemical. It trades about -0.13 of its total potential returns per unit of risk. Sumitomo Chemical is currently generating about -0.23 per unit of volatility. If you would invest 232.00 in Sumitomo Chemical on August 25, 2024 and sell it today you would lose (16.00) from holding Sumitomo Chemical or give up 6.9% 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. Sumitomo Chemical
Performance |
| Timeline |
| POSCO Holdings |
| Sumitomo Chemical |
POSCO Holdings and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and Sumitomo Chemical
The main advantage of trading using opposite POSCO Holdings and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| POSCO Holdings vs. MACOM Technology Solutions | POSCO Holdings vs. Upland Software | POSCO Holdings vs. PLAYSTUDIOS A DL 0001 | POSCO Holdings vs. FANDIFI TECHNOLOGY P |
| Sumitomo Chemical vs. Sociedad Qumica y | Sumitomo Chemical vs. Superior Plus Corp | Sumitomo Chemical vs. NMI Holdings | Sumitomo Chemical vs. Origin Agritech |
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 CEOs Directory module to screen CEOs from public companies around the world.
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