Correlation Between POSCO Holdings and ENB Financial

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

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

Diversification Opportunities for POSCO Holdings and ENB Financial

0.64

Correlation Coefficient

POSCO Holdings  ENB Financial

Poor diversification

The 3 months correlation between POSCO and ENB is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and ENB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENB Financial Corp 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 ENB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENB Financial Corp has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and ENB Financial go up and down completely randomly.

Pair Corralation between POSCO Holdings and ENB Financial

Considering the 90-day investment horizon POSCO Holdings is expected to generate 1.6 times more return on investment than ENB Financial. However, POSCO Holdings is 1.6 times more volatile than ENB Financial Corp. It trades about -0.02 of its potential returns per unit of risk. ENB Financial Corp is currently generating about -0.07 per unit of risk. If you would invest  4,995  in POSCO Holdings on December 1, 2024 and sell it today you would lose (216.00) from holding POSCO Holdings or give up 4.32% of portfolio value over 90 days.

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

POSCO Holdings  vs.  ENB Financial Corp

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 fairly strong forward-looking signals, POSCO Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ENB Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ENB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, ENB Financial is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with POSCO Holdings and ENB Financial

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

The idea behind POSCO Holdings and ENB Financial Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.