Correlation Between POSCO Holdings and Samsung Life

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

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

Diversification Opportunities for POSCO Holdings and Samsung Life

0.17

Correlation Coefficient

POSCO Holdings  Samsung Life

Average diversification

The 3 months correlation between POSCO and Samsung is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Samsung Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Life Insurance 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 Samsung Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Life Insurance has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Samsung Life go up and down completely randomly.

Pair Corralation between POSCO Holdings and Samsung Life

Assuming the 90 days trading horizon POSCO Holdings is expected to generate 0.88 times more return on investment than Samsung Life. However, POSCO Holdings is 1.13 times less risky than Samsung Life. It trades about 0.15 of its potential returns per unit of risk. Samsung Life Insurance is currently generating about -0.08 per unit of risk. If you would invest  24,629,700  in POSCO Holdings on December 5, 2024 and sell it today you would earn a total of  2,170,300  from holding POSCO Holdings or generate 8.81% 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.  Samsung Life Insurance

POSCO Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in POSCO Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, POSCO Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Samsung Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Samsung Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with POSCO Holdings and Samsung Life

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

The idea behind POSCO Holdings and Samsung Life Insurance 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.