Correlation Between Mesabi Trust and POSCO Holdings

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

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

Diversification Opportunities for Mesabi Trust and POSCO Holdings

-0.54

Correlation Coefficient

Mesabi Trust  POSCO Holdings

Excellent diversification

The 3 months correlation between Mesabi and POSCO is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Mesabi Trust and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Mesabi Trust 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 Mesabi Trust 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 Mesabi Trust i.e., Mesabi Trust and POSCO Holdings go up and down completely randomly.

Pair Corralation between Mesabi Trust and POSCO Holdings

Considering the 90-day investment horizon Mesabi Trust is expected to generate 1.35 times more return on investment than POSCO Holdings. However, Mesabi Trust is 1.35 times more volatile than POSCO Holdings. It trades about 0.22 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.16 per unit of risk. If you would invest  1,707  in Mesabi Trust on September 5, 2024 and sell it today you would earn a total of  1,009  from holding Mesabi Trust or generate 59.11% return on investment over 90 days.

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

Mesabi Trust  vs.  POSCO Holdings

Mesabi Trust

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mesabi Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Mesabi Trust sustained 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. In spite of uncertain performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mesabi Trust and POSCO Holdings

The main advantage of trading using opposite Mesabi Trust and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesabi Trust 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 Mesabi Trust 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.