Correlation Between POSCO Holdings and Archer Materials

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

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

Diversification Opportunities for POSCO Holdings and Archer Materials

-0.65

Correlation Coefficient

POSCO Holdings  Archer Materials

Excellent diversification

The 3 months correlation between POSCO and Archer is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Archer Materials Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Materials 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 Archer Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Materials has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Archer Materials go up and down completely randomly.

Pair Corralation between POSCO Holdings and Archer Materials

Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the Archer Materials. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 5.19 times less risky than Archer Materials. The stock trades about -0.36 of its potential returns per unit of risk. The Archer Materials Limited is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Archer Materials Limited on October 1, 2024 and sell it today you would earn a total of  13.00  from holding Archer Materials Limited or generate 65.0% return on investment over 90 days.

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

POSCO Holdings  vs.  Archer Materials Limited

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.

Archer Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Materials Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Archer Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with POSCO Holdings and Archer Materials

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

The idea behind POSCO Holdings and Archer Materials Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.