Correlation Between POSCO Holdings and SM Energy
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and SM 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 SM 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 SM Energy Co, you can compare the effects of market volatilities on POSCO Holdings and SM 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 SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and SM Energy.
Diversification Opportunities for POSCO Holdings and SM Energy
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between POSCO and SM Energy is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Energy 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 SM Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Energy has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and SM Energy go up and down completely randomly.
Pair Corralation between POSCO Holdings and SM Energy
Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the SM Energy. In addition to that, POSCO Holdings is 1.25 times more volatile than SM Energy Co. It trades about -0.22 of its total potential returns per unit of risk. SM Energy Co is currently generating about 0.16 per unit of volatility. If you would invest 4,196 in SM Energy Co on August 27, 2024 and sell it today you would earn a total of 318.00 from holding SM Energy Co or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. SM Energy Co
Performance |
| Timeline |
| POSCO Holdings |
| SM Energy |
POSCO Holdings and SM Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and SM Energy
The main advantage of trading using opposite POSCO Holdings and SM Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, SM 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 SM Energy will offset losses from the drop in SM Energy's long position.The idea behind POSCO Holdings and SM Energy Co 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.| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |