Correlation Between POSCO Holdings and Nokian Renkaat
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Nokian Renkaat 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 Nokian Renkaat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Nokian Renkaat Oyj, you can compare the effects of market volatilities on POSCO Holdings and Nokian Renkaat 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 Nokian Renkaat. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Nokian Renkaat.
Diversification Opportunities for POSCO Holdings and Nokian Renkaat
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between POSCO and Nokian is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Nokian Renkaat Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokian Renkaat Oyj 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 Nokian Renkaat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokian Renkaat Oyj has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Nokian Renkaat go up and down completely randomly.
Pair Corralation between POSCO Holdings and Nokian Renkaat
Assuming the 90 days horizon POSCO Holdings is expected to generate 1.69 times more return on investment than Nokian Renkaat. However, POSCO Holdings is 1.69 times more volatile than Nokian Renkaat Oyj. It trades about 0.01 of its potential returns per unit of risk. Nokian Renkaat Oyj is currently generating about -0.01 per unit of risk. If you would invest 4,861 in POSCO Holdings on September 23, 2024 and sell it today you would lose (621.00) from holding POSCO Holdings or give up 12.78% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 99.41% |
Values | Daily Returns |
POSCO Holdings vs. Nokian Renkaat Oyj
Performance |
Timeline |
POSCO Holdings |
Nokian Renkaat Oyj |
POSCO Holdings and Nokian Renkaat Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with POSCO Holdings and Nokian Renkaat
The main advantage of trading using opposite POSCO Holdings and Nokian Renkaat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Nokian Renkaat 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 Nokian Renkaat will offset losses from the drop in Nokian Renkaat's long position.POSCO Holdings vs. Nucor | POSCO Holdings vs. ArcelorMittal SA | POSCO Holdings vs. ArcelorMittal | POSCO Holdings vs. Steel Dynamics |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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