Correlation Between POSCO Holdings and PetroShale
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and PetroShale 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 PetroShale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and PetroShale, you can compare the effects of market volatilities on POSCO Holdings and PetroShale 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 PetroShale. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and PetroShale.
Diversification Opportunities for POSCO Holdings and PetroShale
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between POSCO and PetroShale is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale 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 PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and PetroShale go up and down completely randomly.
Pair Corralation between POSCO Holdings and PetroShale
Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the PetroShale. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.15 times less risky than PetroShale. The stock trades about -0.26 of its potential returns per unit of risk. The PetroShale is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 29.00 in PetroShale on September 17, 2024 and sell it today you would earn a total of 3.00 from holding PetroShale or generate 10.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
POSCO Holdings vs. PetroShale
Performance |
| Timeline |
| POSCO Holdings |
| PetroShale |
POSCO Holdings and PetroShale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and PetroShale
The main advantage of trading using opposite POSCO Holdings and PetroShale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, PetroShale 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 PetroShale will offset losses from the drop in PetroShale'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 |
| PetroShale vs. POSCO Holdings | PetroShale vs. Schweizerische Nationalbank | PetroShale vs. Berkshire Hathaway | PetroShale 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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