Correlation Between CARSALESCOM and POSCO Holdings

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

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

Diversification Opportunities for CARSALESCOM and POSCO Holdings

-0.72

Correlation Coefficient

CARSALESCOM  POSCO Holdings

Pay attention - limited upside

The 3 months correlation between CARSALESCOM and POSCO is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and CARSALESCOM 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 CARSALESCOM are associated (or correlated) with POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of CARSALESCOM i.e., CARSALESCOM and POSCO Holdings go up and down completely randomly.

Pair Corralation between CARSALESCOM and POSCO Holdings

Assuming the 90 days trading horizon CARSALESCOM is expected to under-perform the POSCO Holdings. But the stock apears to be less risky and, when comparing its historical volatility, CARSALESCOM is 2.22 times less risky than POSCO Holdings. The stock trades about -0.23 of its potential returns per unit of risk. The POSCO Holdings is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,640  in POSCO Holdings on September 16, 2024 and sell it today you would lose (240.00) from holding POSCO Holdings or give up 5.17% of portfolio value over 90 days.

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

CARSALESCOM  vs.  POSCO Holdings

CARSALESCOM

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. Despite fragile performance in the last few months, the Stock's basic 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 CARSALESCOM and POSCO Holdings

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

The idea behind CARSALESCOM and POSCO Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.