Correlation Between POSCO Holdings and CMUV Bancorp

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

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

Diversification Opportunities for POSCO Holdings and CMUV Bancorp

0.06

Correlation Coefficient

POSCO Holdings  CMUV Bancorp

Significant diversification

The 3 months correlation between POSCO and CMUV is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and CMUV Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMUV Bancorp 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 CMUV Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMUV Bancorp has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and CMUV Bancorp go up and down completely randomly.

Pair Corralation between POSCO Holdings and CMUV Bancorp

Considering the 90-day investment horizon POSCO Holdings is expected to generate 2.34 times more return on investment than CMUV Bancorp. However, POSCO Holdings is 2.34 times more volatile than CMUV Bancorp. It trades about 0.1 of its potential returns per unit of risk. CMUV Bancorp is currently generating about 0.03 per unit of risk. If you would invest  4,573  in POSCO Holdings on December 17, 2024 and sell it today you would earn a total of  660.00  from holding POSCO Holdings or generate 14.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

POSCO Holdings  vs.  CMUV Bancorp

POSCO Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in POSCO Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, POSCO Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

CMUV Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CMUV Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, CMUV Bancorp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with POSCO Holdings and CMUV Bancorp

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

The idea behind POSCO Holdings and CMUV Bancorp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.