Correlation Between POSCO Holdings and United States
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and United States Steel, you can compare the effects of market volatilities on POSCO Holdings and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and United States.
Diversification Opportunities for POSCO Holdings and United States
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between POSCO and United is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and United States go up and down completely randomly.
Pair Corralation between POSCO Holdings and United States
Assuming the 90 days horizon POSCO Holdings is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.32 times less risky than United States. The stock trades about -0.13 of its potential returns per unit of risk. The United States Steel is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,391 in United States Steel on September 2, 2024 and sell it today you would earn a total of 399.00 from holding United States Steel or generate 11.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. United States Steel
Performance |
| Timeline |
| POSCO Holdings |
| United States Steel |
POSCO Holdings and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and United States
The main advantage of trading using opposite POSCO Holdings and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.The idea behind POSCO Holdings and United States Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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