Correlation Between POSCO Holdings and Westlake Chemical

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

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

Diversification Opportunities for POSCO Holdings and Westlake Chemical

0.03

Correlation Coefficient

POSCO Holdings  Westlake Chemical

Significant diversification

The 3 months correlation between POSCO and Westlake is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Westlake Chemical Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical 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 Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Westlake Chemical go up and down completely randomly.

Pair Corralation between POSCO Holdings and Westlake Chemical

Considering the 90-day investment horizon POSCO Holdings is expected to generate 3.69 times more return on investment than Westlake Chemical. However, POSCO Holdings is 3.69 times more volatile than Westlake Chemical Partners. It trades about 0.08 of its potential returns per unit of risk. Westlake Chemical Partners is currently generating about 0.04 per unit of risk. If you would invest  4,330  in POSCO Holdings on December 28, 2024 and sell it today you would earn a total of  542.00  from holding POSCO Holdings or generate 12.52% return on investment over 90 days.

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

POSCO Holdings  vs.  Westlake Chemical Partners

POSCO Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in POSCO Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, POSCO Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Westlake Chemical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Westlake Chemical Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Westlake Chemical is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with POSCO Holdings and Westlake Chemical

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

The idea behind POSCO Holdings and Westlake Chemical Partners 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.