Correlation Between POSCO Holdings and Universal Stainless

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Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and Universal Stainless 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 Universal Stainless into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Universal Stainless Alloy, you can compare the effects of market volatilities on POSCO Holdings and Universal Stainless 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 Universal Stainless. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Universal Stainless.

Diversification Opportunities for POSCO Holdings and Universal Stainless

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between POSCO and Universal is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Universal Stainless Alloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Stainless Alloy 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 Universal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Stainless Alloy has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Universal Stainless go up and down completely randomly.

Pair Corralation between POSCO Holdings and Universal Stainless

Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the Universal Stainless. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.63 times less risky than Universal Stainless. The stock trades about -0.1 of its potential returns per unit of risk. The Universal Stainless Alloy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,558  in Universal Stainless Alloy on February 2, 2024 and sell it today you would earn a total of  348.00  from holding Universal Stainless Alloy or generate 13.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

POSCO Holdings  vs.  Universal Stainless Alloy

 Performance 
       Timeline  
POSCO Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest abnormal performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Universal Stainless Alloy 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Universal Stainless reported solid returns over the last few months and may actually be approaching a breakup point.

POSCO Holdings and Universal Stainless Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with POSCO Holdings and Universal Stainless

The main advantage of trading using opposite POSCO Holdings and Universal Stainless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, Universal Stainless 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 Universal Stainless will offset losses from the drop in Universal Stainless' long position.
The idea behind POSCO Holdings and Universal Stainless Alloy 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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