Correlation Between POSCO Holdings and SM Energy

Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and SM 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 SM 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 SM Energy Co, you can compare the effects of market volatilities on POSCO Holdings and SM 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 SM Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and SM Energy.

Diversification Opportunities for POSCO Holdings and SM Energy

-0.68

Correlation Coefficient

POSCO Holdings  SM Energy

Excellent diversification

The 3 months correlation between POSCO and SM Energy is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and SM Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM 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 SM Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Energy has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and SM Energy go up and down completely randomly.

Pair Corralation between POSCO Holdings and SM Energy

Considering the 90-day investment horizon POSCO Holdings is expected to generate 0.95 times more return on investment than SM Energy. However, POSCO Holdings is 1.05 times less risky than SM Energy. It trades about 0.12 of its potential returns per unit of risk. SM Energy Co is currently generating about -0.08 per unit of risk. If you would invest  4,515  in POSCO Holdings on December 20, 2024 and sell it today you would earn a total of  817.00  from holding POSCO Holdings or generate 18.1% return on investment over 90 days.

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

POSCO Holdings  vs.  SM Energy Co

POSCO Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in POSCO Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, POSCO Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

SM Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days SM Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with POSCO Holdings and SM Energy

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

The idea behind POSCO Holdings and SM Energy Co 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..