Correlation Between POSCO Holdings and Keum Kang

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

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

Diversification Opportunities for POSCO Holdings and Keum Kang

0.7

Correlation Coefficient

POSCO Holdings  Keum Kang

Poor diversification

The 3 months correlation between POSCO and Keum is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Keum Kang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keum Kang 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 Keum Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keum Kang Steel has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Keum Kang go up and down completely randomly.

Pair Corralation between POSCO Holdings and Keum Kang

Assuming the 90 days trading horizon POSCO Holdings is expected to under-perform the Keum Kang. In addition to that, POSCO Holdings is 1.22 times more volatile than Keum Kang Steel. It trades about -0.1 of its total potential returns per unit of risk. Keum Kang Steel is currently generating about -0.11 per unit of volatility. If you would invest  498,500  in Keum Kang Steel on August 31, 2024 and sell it today you would lose (74,000) from holding Keum Kang Steel or give up 14.84% of portfolio value over 90 days.

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

POSCO Holdings  vs.  Keum Kang Steel

POSCO Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POSCO Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Keum Kang Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keum Kang Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with POSCO Holdings and Keum Kang

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

The idea behind POSCO Holdings and Keum Kang 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.