Correlation Between POSCO Holdings and Freehold Royalties

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

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

Diversification Opportunities for POSCO Holdings and Freehold Royalties

0.58

Correlation Coefficient

POSCO Holdings  Freehold Royalties

Very weak diversification

The 3 months correlation between POSCO and Freehold is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties 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 Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Freehold Royalties go up and down completely randomly.

Pair Corralation between POSCO Holdings and Freehold Royalties

Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the Freehold Royalties. In addition to that, POSCO Holdings is 2.11 times more volatile than Freehold Royalties. It trades about -0.06 of its total potential returns per unit of risk. Freehold Royalties is currently generating about 0.0 per unit of volatility. If you would invest  977.00  in Freehold Royalties on September 12, 2024 and sell it today you would lose (48.00) from holding Freehold Royalties or give up 4.91% of portfolio value over 90 days.

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

POSCO Holdings  vs.  Freehold Royalties

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.

Freehold Royalties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freehold Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Freehold Royalties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with POSCO Holdings and Freehold Royalties

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

The idea behind POSCO Holdings and Freehold Royalties 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.