Correlation Between Phoenix Materials and POSCO Holdings

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

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

Diversification Opportunities for Phoenix Materials and POSCO Holdings

-0.33

Correlation Coefficient

Phoenix Materials  POSCO Holdings

Very good diversification

The 3 months correlation between Phoenix and POSCO is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix Materials Co and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Phoenix Materials 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 Phoenix Materials Co are associated (or correlated) with POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Phoenix Materials i.e., Phoenix Materials and POSCO Holdings go up and down completely randomly.

Pair Corralation between Phoenix Materials and POSCO Holdings

Assuming the 90 days trading horizon Phoenix Materials Co is expected to under-perform the POSCO Holdings. In addition to that, Phoenix Materials is 1.64 times more volatile than POSCO Holdings. It trades about -0.04 of its total potential returns per unit of risk. POSCO Holdings is currently generating about 0.15 per unit of volatility. If you would invest  25,967,700  in POSCO Holdings on December 22, 2024 and sell it today you would earn a total of  6,632,300  from holding POSCO Holdings or generate 25.54% return on investment over 90 days.

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

Phoenix Materials Co  vs.  POSCO Holdings

Phoenix Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Phoenix Materials Co 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.

POSCO Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in POSCO Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, POSCO Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phoenix Materials and POSCO Holdings

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

The idea behind Phoenix Materials Co and POSCO Holdings 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.