Correlation Between SEOJEON ELECTRIC and POSCO Holdings

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

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

Diversification Opportunities for SEOJEON ELECTRIC and POSCO Holdings

0.01

Correlation Coefficient

SEOJEON ELECTRIC  POSCO Holdings

Significant diversification

The 3 months correlation between SEOJEON and POSCO is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding SEOJEON ELECTRIC MACHINERY and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and SEOJEON ELECTRIC 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 SEOJEON ELECTRIC MACHINERY 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 SEOJEON ELECTRIC i.e., SEOJEON ELECTRIC and POSCO Holdings go up and down completely randomly.

Pair Corralation between SEOJEON ELECTRIC and POSCO Holdings

Assuming the 90 days trading horizon SEOJEON ELECTRIC MACHINERY is expected to generate 1.56 times more return on investment than POSCO Holdings. However, SEOJEON ELECTRIC is 1.56 times more volatile than POSCO Holdings. It trades about 0.1 of its potential returns per unit of risk. POSCO Holdings is currently generating about 0.02 per unit of risk. If you would invest  395,500  in SEOJEON ELECTRIC MACHINERY on December 5, 2024 and sell it today you would earn a total of  73,500  from holding SEOJEON ELECTRIC MACHINERY or generate 18.58% return on investment over 90 days.

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

SEOJEON ELECTRIC MACHINERY  vs.  POSCO Holdings

SEOJEON ELECTRIC MAC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SEOJEON ELECTRIC MACHINERY are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SEOJEON ELECTRIC sustained solid returns over the last few months and may actually be approaching a breakup point.

POSCO Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in POSCO Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, POSCO Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SEOJEON ELECTRIC and POSCO Holdings

The main advantage of trading using opposite SEOJEON ELECTRIC and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEOJEON ELECTRIC 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 SEOJEON ELECTRIC MACHINERY 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.