Correlation Between Posco ICT and THiRA UTECH

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

By analyzing existing cross correlation between Posco ICT and THiRA UTECH LTD, you can compare the effects of market volatilities on Posco ICT and THiRA UTECH 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 THiRA UTECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Posco ICT and THiRA UTECH.

Diversification Opportunities for Posco ICT and THiRA UTECH

0.76

Correlation Coefficient

Posco ICT  THiRA UTECH

Poor diversification

The 3 months correlation between Posco and THiRA is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Posco ICT and THiRA UTECH LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THiRA UTECH LTD 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 THiRA UTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THiRA UTECH LTD has no effect on the direction of Posco ICT i.e., Posco ICT and THiRA UTECH go up and down completely randomly.

Pair Corralation between Posco ICT and THiRA UTECH

Assuming the 90 days trading horizon Posco ICT is expected to generate 15.11 times less return on investment than THiRA UTECH. But when comparing it to its historical volatility, Posco ICT is 1.91 times less risky than THiRA UTECH. It trades about 0.04 of its potential returns per unit of risk. THiRA UTECH LTD is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  451,500  in THiRA UTECH LTD on October 23, 2024 and sell it today you would earn a total of  98,500  from holding THiRA UTECH LTD or generate 21.82% return on investment over 90 days.

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

Posco ICT  vs.  THiRA UTECH LTD

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

THiRA UTECH LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days THiRA UTECH LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, THiRA UTECH 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 ICT and THiRA UTECH

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

The idea behind Posco ICT and THiRA UTECH LTD 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.