Correlation Between Clean Energy and POSCO Holdings

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

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

Diversification Opportunities for Clean Energy and POSCO Holdings

0.45

Correlation Coefficient

Clean Energy  POSCO Holdings

Very weak diversification

The 3 months correlation between Clean and POSCO is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Clean Energy 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 Clean Energy Fuels 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 Clean Energy i.e., Clean Energy and POSCO Holdings go up and down completely randomly.

Pair Corralation between Clean Energy and POSCO Holdings

Given the investment horizon of 90 days Clean Energy Fuels is expected to generate 1.73 times more return on investment than POSCO Holdings. However, Clean Energy is 1.73 times more volatile than POSCO Holdings. It trades about -0.07 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.28 per unit of risk. If you would invest  242.00  in Clean Energy Fuels on January 25, 2024 and sell it today you would lose (13.00) from holding Clean Energy Fuels or give up 5.37% of portfolio value over 90 days.

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

Clean Energy Fuels  vs.  POSCO Holdings

Clean Energy Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Energy Fuels 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 basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm 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. In spite of fairly strong forward-looking signals, POSCO Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clean Energy and POSCO Holdings

The main advantage of trading using opposite Clean Energy and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy 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 Clean Energy Fuels 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.