Correlation Between POSCO Holdings and Korea Refractories

Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Korea Refractories 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 Korea Refractories into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between POSCO Holdings and Korea Refractories Co, you can compare the effects of market volatilities on POSCO Holdings and Korea Refractories 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 Korea Refractories. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Korea Refractories.

Diversification Opportunities for POSCO Holdings and Korea Refractories

0.1

Correlation Coefficient

POSCO Holdings  Korea Refractories

Average diversification

The 3 months correlation between POSCO and Korea is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Korea Refractories Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Refractories 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 Korea Refractories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Refractories has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Korea Refractories go up and down completely randomly.

Pair Corralation between POSCO Holdings and Korea Refractories

Assuming the 90 days trading horizon POSCO Holdings is expected to generate 2.76 times more return on investment than Korea Refractories. However, POSCO Holdings is 2.76 times more volatile than Korea Refractories Co. It trades about 0.1 of its potential returns per unit of risk. Korea Refractories Co is currently generating about -0.01 per unit of risk. If you would invest  25,125,300  in POSCO Holdings on December 30, 2024 and sell it today you would earn a total of  4,074,700  from holding POSCO Holdings or generate 16.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

POSCO Holdings  vs.  Korea Refractories Co

POSCO Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in POSCO Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, POSCO Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Korea Refractories

Risk-Adjusted Performance

Very Weak

Over the last 90 days Korea Refractories Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Refractories is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with POSCO Holdings and Korea Refractories

The main advantage of trading using opposite POSCO Holdings and Korea Refractories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Korea Refractories 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 Korea Refractories will offset losses from the drop in Korea Refractories' long position.

The idea behind POSCO Holdings and Korea Refractories 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.