Correlation Between POSCO Holdings and ARB
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and ARB 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 ARB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and ARB Limited, you can compare the effects of market volatilities on POSCO Holdings and ARB 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 ARB. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and ARB.
Diversification Opportunities for POSCO Holdings and ARB
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between POSCO and ARB is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and ARB Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARB Limited 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 ARB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARB Limited has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and ARB go up and down completely randomly.
Pair Corralation between POSCO Holdings and ARB
Considering the 90-day investment horizon POSCO Holdings is expected to generate 2.46 times less return on investment than ARB. In addition to that, POSCO Holdings is 2.18 times more volatile than ARB Limited. It trades about 0.01 of its total potential returns per unit of risk. ARB Limited is currently generating about 0.07 per unit of volatility. If you would invest 1,873 in ARB Limited on September 2, 2024 and sell it today you would earn a total of 619.00 from holding ARB Limited or generate 33.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 72.38% |
Values | Daily Returns |
POSCO Holdings vs. ARB Limited
Performance |
Timeline |
POSCO Holdings |
ARB Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
POSCO Holdings and ARB Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with POSCO Holdings and ARB
The main advantage of trading using opposite POSCO Holdings and ARB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, ARB 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 ARB will offset losses from the drop in ARB's long position.POSCO Holdings vs. Olympic Steel | POSCO Holdings vs. Universal Stainless Alloy | POSCO Holdings vs. Outokumpu Oyj ADR | POSCO Holdings vs. Ternium SA ADR |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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