Correlation Between POSCO Holdings and CLS Holdings

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

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

Diversification Opportunities for POSCO Holdings and CLS Holdings

0.19

Correlation Coefficient

POSCO Holdings  CLS Holdings

Average diversification

The 3 months correlation between POSCO and CLS is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and CLS Holdings USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLS Holdings USA 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 CLS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLS Holdings USA has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and CLS Holdings go up and down completely randomly.

Pair Corralation between POSCO Holdings and CLS Holdings

Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the CLS Holdings. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 4.55 times less risky than CLS Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The CLS Holdings USA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4.47  in CLS Holdings USA on December 2, 2024 and sell it today you would lose (1.42) from holding CLS Holdings USA or give up 31.77% of portfolio value over 90 days.

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

POSCO Holdings  vs.  CLS Holdings USA

POSCO Holdings

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CLS Holdings USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CLS Holdings USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CLS Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with POSCO Holdings and CLS Holdings

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

The idea behind POSCO Holdings and CLS Holdings USA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.