Correlation Between POSCO Holdings and Hwasung Industrial
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Hwasung Industrial 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 Hwasung Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Hwasung Industrial Co, you can compare the effects of market volatilities on POSCO Holdings and Hwasung Industrial 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 Hwasung Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Hwasung Industrial.
Diversification Opportunities for POSCO Holdings and Hwasung Industrial
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between POSCO and Hwasung is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Hwasung Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwasung Industrial 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 Hwasung Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwasung Industrial has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Hwasung Industrial go up and down completely randomly.
Pair Corralation between POSCO Holdings and Hwasung Industrial
Assuming the 90 days trading horizon POSCO Holdings is expected to under-perform the Hwasung Industrial. In addition to that, POSCO Holdings is 1.4 times more volatile than Hwasung Industrial Co. It trades about -0.21 of its total potential returns per unit of risk. Hwasung Industrial Co is currently generating about 0.12 per unit of volatility. If you would invest 864,545 in Hwasung Industrial Co on October 8, 2024 and sell it today you would earn a total of 120,455 from holding Hwasung Industrial Co or generate 13.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
POSCO Holdings vs. Hwasung Industrial Co
Performance |
Timeline |
POSCO Holdings |
Hwasung Industrial |
POSCO Holdings and Hwasung Industrial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with POSCO Holdings and Hwasung Industrial
The main advantage of trading using opposite POSCO Holdings and Hwasung Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Hwasung Industrial 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 Hwasung Industrial will offset losses from the drop in Hwasung Industrial's long position.POSCO Holdings vs. Shinil Electronics Co | POSCO Holdings vs. Barunson Entertainment Arts | POSCO Holdings vs. ITM Semiconductor Co | POSCO Holdings vs. Hanmi Semiconductor Co |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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