Correlation Between POSCO Holdings and Petra Diamonds

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

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

Diversification Opportunities for POSCO Holdings and Petra Diamonds

0.93

Correlation Coefficient

POSCO Holdings  Petra Diamonds

Almost no diversification

The 3 months correlation between POSCO and Petra is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Petra Diamonds Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petra Diamonds 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 Petra Diamonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petra Diamonds has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Petra Diamonds go up and down completely randomly.

Pair Corralation between POSCO Holdings and Petra Diamonds

Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the Petra Diamonds. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.38 times less risky than Petra Diamonds. The stock trades about -0.24 of its potential returns per unit of risk. The Petra Diamonds Limited is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Petra Diamonds Limited on September 17, 2024 and sell it today you would lose (18.00) from holding Petra Diamonds Limited or give up 33.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

POSCO Holdings  vs.  Petra Diamonds Limited

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.

Petra Diamonds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petra Diamonds Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with POSCO Holdings and Petra Diamonds

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

The idea behind POSCO Holdings and Petra Diamonds Limited 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.