Correlation Between POSCO Holdings and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Olympic Steel 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 Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Olympic Steel, you can compare the effects of market volatilities on POSCO Holdings and Olympic Steel 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 Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Olympic Steel.
Diversification Opportunities for POSCO Holdings and Olympic Steel
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between POSCO and Olympic is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic Steel 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 Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Olympic Steel go up and down completely randomly.
Pair Corralation between POSCO Holdings and Olympic Steel
Considering the 90-day investment horizon POSCO Holdings is expected to generate 0.81 times more return on investment than Olympic Steel. However, POSCO Holdings is 1.24 times less risky than Olympic Steel. It trades about -0.08 of its potential returns per unit of risk. Olympic Steel is currently generating about -0.08 per unit of risk. If you would invest 7,978 in POSCO Holdings on August 27, 2024 and sell it today you would lose (2,553) from holding POSCO Holdings or give up 32.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
POSCO Holdings vs. Olympic Steel
Performance |
| Timeline |
| POSCO Holdings |
| Olympic Steel |
POSCO Holdings and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and Olympic Steel
The main advantage of trading using opposite POSCO Holdings and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Olympic Steel 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 Olympic Steel will offset losses from the drop in Olympic Steel's long position.The idea behind POSCO Holdings and Olympic Steel 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.| Olympic Steel vs. Universal Stainless Alloy | Olympic Steel vs. Outokumpu Oyj ADR | Olympic Steel vs. Usinas Siderurgicas de | Olympic Steel vs. POSCO Holdings |
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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