Correlation Between POSCO Holdings and Acerinox

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

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

Diversification Opportunities for POSCO Holdings and Acerinox

0.33

Correlation Coefficient

POSCO Holdings  Acerinox

Weak diversification

The 3 months correlation between POSCO and Acerinox is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Acerinox SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox SA ADR 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 Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox SA ADR has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Acerinox go up and down completely randomly.

Pair Corralation between POSCO Holdings and Acerinox

Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the Acerinox. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.02 times less risky than Acerinox. The stock trades about -0.35 of its potential returns per unit of risk. The Acerinox SA ADR is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Acerinox SA ADR on October 5, 2024 and sell it today you would lose (10.00) from holding Acerinox SA ADR or give up 2.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

POSCO Holdings  vs.  Acerinox SA ADR

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Acerinox SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acerinox SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Acerinox is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with POSCO Holdings and Acerinox

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

The idea behind POSCO Holdings and Acerinox SA ADR 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.