Correlation Between Isoenergy and POSCO Holdings

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

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

Diversification Opportunities for Isoenergy and POSCO Holdings

0.03

Correlation Coefficient

Isoenergy  POSCO Holdings

Significant diversification

The 3 months correlation between Isoenergy and POSCO is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Isoenergy and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Isoenergy 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 Isoenergy 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 Isoenergy i.e., Isoenergy and POSCO Holdings go up and down completely randomly.

Pair Corralation between Isoenergy and POSCO Holdings

Assuming the 90 days horizon Isoenergy is expected to generate 15.73 times more return on investment than POSCO Holdings. However, Isoenergy is 15.73 times more volatile than POSCO Holdings. It trades about 0.13 of its potential returns per unit of risk. POSCO Holdings is currently generating about 0.08 per unit of risk. If you would invest  179.00  in Isoenergy on December 28, 2024 and sell it today you would earn a total of  557.00  from holding Isoenergy or generate 311.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

Isoenergy  vs.  POSCO Holdings

Isoenergy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Isoenergy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Isoenergy reported solid returns over the last few months and may actually be approaching a breakup point.

POSCO Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in POSCO Holdings are ranked lower than 6 (%) 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 Isoenergy and POSCO Holdings

The main advantage of trading using opposite Isoenergy and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Isoenergy 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 Isoenergy 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.