Correlation Between International Petroleum and POSCO Holdings

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

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

Diversification Opportunities for International Petroleum and POSCO Holdings

0.51

Correlation Coefficient

International Petroleum  POSCO Holdings

Very weak diversification

The 3 months correlation between International and POSCO is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding International Petroleum and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and International Petroleum 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 International Petroleum 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 International Petroleum i.e., International Petroleum and POSCO Holdings go up and down completely randomly.

Pair Corralation between International Petroleum and POSCO Holdings

Assuming the 90 days horizon International Petroleum is expected to generate 0.76 times more return on investment than POSCO Holdings. However, International Petroleum is 1.32 times less risky than POSCO Holdings. It trades about 0.25 of its potential returns per unit of risk. POSCO Holdings is currently generating about 0.11 per unit of risk. If you would invest  1,133  in International Petroleum on December 28, 2024 and sell it today you would earn a total of  392.00  from holding International Petroleum or generate 34.6% return on investment over 90 days.

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

International Petroleum  vs.  POSCO Holdings

International Petroleum

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Petroleum are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, International Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

POSCO Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in POSCO Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, POSCO Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Petroleum and POSCO Holdings

The main advantage of trading using opposite International Petroleum and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Petroleum 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 International Petroleum 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.