Correlation Between POSCO Holdings and NXT Energy
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and NXT Energy 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 NXT Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and NXT Energy Solutions, you can compare the effects of market volatilities on POSCO Holdings and NXT Energy 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 NXT Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and NXT Energy.
Diversification Opportunities for POSCO Holdings and NXT Energy
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between POSCO and NXT is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and NXT Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXT Energy Solutions 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 NXT Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXT Energy Solutions has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and NXT Energy go up and down completely randomly.
Pair Corralation between POSCO Holdings and NXT Energy
Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the NXT Energy. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 4.85 times less risky than NXT Energy. The stock trades about -0.1 of its potential returns per unit of risk. The NXT Energy Solutions is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 12.00 in NXT Energy Solutions on September 14, 2024 and sell it today you would earn a total of 0.00 from holding NXT Energy Solutions or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. NXT Energy Solutions
Performance |
| Timeline |
| POSCO Holdings |
| NXT Energy Solutions |
POSCO Holdings and NXT Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and NXT Energy
The main advantage of trading using opposite POSCO Holdings and NXT Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, NXT Energy 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 NXT Energy will offset losses from the drop in NXT Energy'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 |
| NXT Energy vs. POSCO Holdings | NXT Energy vs. Schweizerische Nationalbank | NXT Energy vs. Berkshire Hathaway | NXT Energy vs. Berkshire Hathaway |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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