Correlation Between POSCO Holdings and TOWA
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and TOWA 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 TOWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and TOWA Corporation, you can compare the effects of market volatilities on POSCO Holdings and TOWA 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 TOWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and TOWA.
Diversification Opportunities for POSCO Holdings and TOWA
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between POSCO and TOWA is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and TOWA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOWA 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 TOWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOWA has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and TOWA go up and down completely randomly.
Pair Corralation between POSCO Holdings and TOWA
Assuming the 90 days horizon POSCO Holdings is expected to generate 0.58 times more return on investment than TOWA. However, POSCO Holdings is 1.73 times less risky than TOWA. It trades about -0.06 of its potential returns per unit of risk. TOWA Corporation is currently generating about -0.04 per unit of risk. If you would invest 5,150 in POSCO Holdings on January 10, 2025 and sell it today you would lose (1,130) from holding POSCO Holdings or give up 21.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. TOWA Corp.
Performance |
| Timeline |
| POSCO Holdings |
| TOWA |
POSCO Holdings and TOWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and TOWA
The main advantage of trading using opposite POSCO Holdings and TOWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, TOWA 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 TOWA will offset losses from the drop in TOWA's long position.| POSCO Holdings vs. LPKF Laser Electronics | POSCO Holdings vs. High Liner Foods | POSCO Holdings vs. Nanjing Panda Electronics | POSCO Holdings vs. Tyson Foods |
| TOWA vs. SBA Communications Corp | TOWA vs. COMBA TELECOM SYST | TOWA vs. Fortescue Metals Group | TOWA vs. CORNISH METALS INC |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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