Correlation Between POSCO Holdings and Commercial Metals
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Commercial Metals 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 Commercial Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Commercial Metals, you can compare the effects of market volatilities on POSCO Holdings and Commercial Metals 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 Commercial Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Commercial Metals.
Diversification Opportunities for POSCO Holdings and Commercial Metals
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between POSCO and Commercial is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Commercial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Metals 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 Commercial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Metals has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Commercial Metals go up and down completely randomly.
Pair Corralation between POSCO Holdings and Commercial Metals
Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the Commercial Metals. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.21 times less risky than Commercial Metals. The stock trades about -0.19 of its potential returns per unit of risk. The Commercial Metals is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 5,424 in Commercial Metals on November 1, 2024 and sell it today you would lose (525.00) from holding Commercial Metals or give up 9.68% 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. Commercial Metals
Performance |
| Timeline |
| POSCO Holdings |
| Commercial Metals |
POSCO Holdings and Commercial Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and Commercial Metals
The main advantage of trading using opposite POSCO Holdings and Commercial Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Commercial Metals 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 Commercial Metals will offset losses from the drop in Commercial Metals' 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 |
| Commercial Metals vs. Olympic Steel | Commercial Metals vs. Steel Dynamics | Commercial Metals vs. Nucor Corp | Commercial Metals vs. Universal Stainless Alloy |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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