Correlation Between POSCO Holdings and Newmont

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

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

Diversification Opportunities for POSCO Holdings and Newmont

-0.35

Correlation Coefficient

POSCO Holdings  Newmont

Very good diversification

The 3 months correlation between POSCO and Newmont is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Newmont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont and POSCO Holdings 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 POSCO Holdings are associated (or correlated) with Newmont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Newmont go up and down completely randomly.

Pair Corralation between POSCO Holdings and Newmont

Assuming the 90 days horizon POSCO Holdings is expected to generate 1.39 times more return on investment than Newmont. However, POSCO Holdings is 1.39 times more volatile than Newmont. It trades about 0.11 of its potential returns per unit of risk. Newmont is currently generating about 0.03 per unit of risk. If you would invest  4,120  in POSCO Holdings on December 7, 2024 and sell it today you would earn a total of  780.00  from holding POSCO Holdings or generate 18.93% return on investment over 90 days.

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

POSCO Holdings  vs.  Newmont

POSCO Holdings

Risk-Adjusted Performance

Modest

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. Despite nearly unsteady basic indicators, POSCO Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Newmont

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newmont are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Newmont is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with POSCO Holdings and Newmont

The main advantage of trading using opposite POSCO Holdings and Newmont positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Newmont 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 Newmont will offset losses from the drop in Newmont's long position.

The idea behind POSCO Holdings and Newmont 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.