Correlation Between POSCO Holdings and Eastern Michigan

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

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

Diversification Opportunities for POSCO Holdings and Eastern Michigan

0.16

Correlation Coefficient

POSCO Holdings  Eastern Michigan

Average diversification

The 3 months correlation between POSCO and Eastern is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Eastern Michigan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Michigan Fin 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 Eastern Michigan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Michigan Fin has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Eastern Michigan go up and down completely randomly.

Pair Corralation between POSCO Holdings and Eastern Michigan

Considering the 90-day investment horizon POSCO Holdings is expected to generate 1.08 times less return on investment than Eastern Michigan. In addition to that, POSCO Holdings is 2.11 times more volatile than Eastern Michigan Financial. It trades about 0.19 of its total potential returns per unit of risk. Eastern Michigan Financial is currently generating about 0.44 per unit of volatility. If you would invest  3,601  in Eastern Michigan Financial on October 27, 2024 and sell it today you would earn a total of  174.00  from holding Eastern Michigan Financial or generate 4.83% return on investment over 90 days.

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

POSCO Holdings  vs.  Eastern Michigan Financial

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.

Eastern Michigan Fin

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Michigan Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Eastern Michigan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with POSCO Holdings and Eastern Michigan

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

The idea behind POSCO Holdings and Eastern Michigan Financial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.