Correlation Between POSCO Holdings and JETEMA Co

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

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

Diversification Opportunities for POSCO Holdings and JETEMA Co

-0.42

Correlation Coefficient

POSCO Holdings  JETEMA Co

Very good diversification

The 3 months correlation between POSCO and JETEMA is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and JETEMA Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JETEMA Co 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 JETEMA Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JETEMA Co has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and JETEMA Co go up and down completely randomly.

Pair Corralation between POSCO Holdings and JETEMA Co

Assuming the 90 days trading horizon POSCO Holdings is expected to under-perform the JETEMA Co. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.35 times less risky than JETEMA Co. The stock trades about -0.16 of its potential returns per unit of risk. The JETEMA Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,610,000  in JETEMA Co on September 13, 2024 and sell it today you would earn a total of  74,000  from holding JETEMA Co or generate 4.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

POSCO Holdings  vs.  JETEMA Co

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

JETEMA Co

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JETEMA Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JETEMA Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with POSCO Holdings and JETEMA Co

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

The idea behind POSCO Holdings and JETEMA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.