Correlation Between SWISS WATER and POSCO Holdings

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

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

Diversification Opportunities for SWISS WATER and POSCO Holdings

-0.75

Correlation Coefficient

SWISS WATER  POSCO Holdings

Pay attention - limited upside

The 3 months correlation between SWISS and POSCO is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and SWISS WATER 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 SWISS WATER DECAFFCOFFEE 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 SWISS WATER i.e., SWISS WATER and POSCO Holdings go up and down completely randomly.

Pair Corralation between SWISS WATER and POSCO Holdings

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to generate 0.83 times more return on investment than POSCO Holdings. However, SWISS WATER DECAFFCOFFEE is 1.2 times less risky than POSCO Holdings. It trades about 0.18 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.35 per unit of risk. If you would invest  248.00  in SWISS WATER DECAFFCOFFEE on September 5, 2024 and sell it today you would earn a total of  24.00  from holding SWISS WATER DECAFFCOFFEE or generate 9.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

SWISS WATER DECAFFCOFFEE  vs.  POSCO Holdings

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SWISS WATER reported solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SWISS WATER and POSCO Holdings

The main advantage of trading using opposite SWISS WATER and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER 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 SWISS WATER DECAFFCOFFEE 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.