Correlation Between POSCO Holdings and BlueScope Steel
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and BlueScope Steel 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 BlueScope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and BlueScope Steel Ltd, you can compare the effects of market volatilities on POSCO Holdings and BlueScope Steel 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 BlueScope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and BlueScope Steel.
Diversification Opportunities for POSCO Holdings and BlueScope Steel
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between POSCO and BlueScope is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and BlueScope Steel Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and BlueScope Steel go up and down completely randomly.
Pair Corralation between POSCO Holdings and BlueScope Steel
Considering the 90-day investment horizon POSCO Holdings is expected to generate 2.46 times less return on investment than BlueScope Steel. But when comparing it to its historical volatility, POSCO Holdings is 1.01 times less risky than BlueScope Steel. It trades about 0.01 of its potential returns per unit of risk. BlueScope Steel Ltd is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,707 in BlueScope Steel Ltd on August 28, 2024 and sell it today you would earn a total of 1,172 from holding BlueScope Steel Ltd or generate 20.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.9% |
| Values | Daily Returns |
POSCO Holdings vs. BlueScope Steel Ltd
Performance |
| Timeline |
| POSCO Holdings |
| BlueScope Steel |
POSCO Holdings and BlueScope Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and BlueScope Steel
The main advantage of trading using opposite POSCO Holdings and BlueScope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, BlueScope Steel 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 BlueScope Steel will offset losses from the drop in BlueScope Steel's long position.The idea behind POSCO Holdings and BlueScope Steel Ltd 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.| BlueScope Steel vs. Olympic Steel | BlueScope Steel vs. Mesabi Trust | BlueScope Steel vs. Universal Stainless Alloy | BlueScope Steel vs. POSCO Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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