Correlation Between Posco ICT and CJ ENM

Can any of the company-specific risk be diversified away by investing in both Posco ICT and CJ ENM 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 ICT and CJ ENM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Posco ICT and CJ ENM, you can compare the effects of market volatilities on Posco ICT and CJ ENM 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 ICT with a short position of CJ ENM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Posco ICT and CJ ENM.

Diversification Opportunities for Posco ICT and CJ ENM

0.51

Correlation Coefficient

Posco ICT  CJ ENM

Very weak diversification

The 3 months correlation between Posco and 035760 is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Posco ICT and CJ ENM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ ENM and Posco ICT 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 ICT are associated (or correlated) with CJ ENM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ ENM has no effect on the direction of Posco ICT i.e., Posco ICT and CJ ENM go up and down completely randomly.

Pair Corralation between Posco ICT and CJ ENM

Assuming the 90 days trading horizon Posco ICT is expected to under-perform the CJ ENM. In addition to that, Posco ICT is 1.24 times more volatile than CJ ENM. It trades about -0.17 of its total potential returns per unit of risk. CJ ENM is currently generating about -0.07 per unit of volatility. If you would invest  7,350,000  in CJ ENM on September 3, 2024 and sell it today you would lose (880,000) from holding CJ ENM or give up 11.97% of portfolio value over 90 days.

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

Posco ICT  vs.  CJ ENM

Posco ICT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Posco ICT 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.

CJ ENM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CJ ENM 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 ICT and CJ ENM

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

The idea behind Posco ICT and CJ ENM 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..