Correlation Between POSCO Holdings and Toray Industries
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Toray Industries 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 Toray Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Toray Industries, you can compare the effects of market volatilities on POSCO Holdings and Toray Industries 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 Toray Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Toray Industries.
Diversification Opportunities for POSCO Holdings and Toray Industries
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between POSCO and Toray is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Toray Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toray Industries 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 Toray Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toray Industries has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Toray Industries go up and down completely randomly.
Pair Corralation between POSCO Holdings and Toray Industries
Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the Toray Industries. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.32 times less risky than Toray Industries. The stock trades about -0.09 of its potential returns per unit of risk. The Toray Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 488.00 in Toray Industries on August 24, 2024 and sell it today you would earn a total of 72.00 from holding Toray Industries or generate 14.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 63.2% |
| Values | Daily Returns |
POSCO Holdings vs. Toray Industries
Performance |
| Timeline |
| POSCO Holdings |
| Toray Industries |
POSCO Holdings and Toray Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and Toray Industries
The main advantage of trading using opposite POSCO Holdings and Toray Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Toray Industries 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 Toray Industries will offset losses from the drop in Toray Industries' 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 |
| Toray Industries vs. Unifi Inc | Toray Industries vs. Albany International | Toray Industries vs. Sumitomo Electric Industries | Toray Industries vs. Sekisui House |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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