Correlation Between POSCO Holdings and Questerre Energy

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

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

Diversification Opportunities for POSCO Holdings and Questerre Energy

0.59

Correlation Coefficient

POSCO Holdings  Questerre Energy

Very weak diversification

The 3 months correlation between POSCO and Questerre is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Questerre Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Questerre Energy 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 Questerre Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Questerre Energy has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Questerre Energy go up and down completely randomly.

Pair Corralation between POSCO Holdings and Questerre Energy

Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the Questerre Energy. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.68 times less risky than Questerre Energy. The stock trades about -0.21 of its potential returns per unit of risk. The Questerre Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Questerre Energy on September 12, 2024 and sell it today you would lose (1.00) from holding Questerre Energy or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

POSCO Holdings  vs.  Questerre Energy

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.

Questerre Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Questerre Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Questerre Energy 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 Questerre Energy

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

The idea behind POSCO Holdings and Questerre Energy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.