Correlation Between POSCO Holdings and Enterprise

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

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

Diversification Opportunities for POSCO Holdings and Enterprise

-0.81

Correlation Coefficient

POSCO Holdings  Enterprise

Pay attention - limited upside

The 3 months correlation between POSCO and Enterprise is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Enterprise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Group 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 Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Group has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Enterprise go up and down completely randomly.

Pair Corralation between POSCO Holdings and Enterprise

Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.8 times less risky than Enterprise. The stock trades about -0.02 of its potential returns per unit of risk. The Enterprise Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  85.00  in Enterprise Group on February 11, 2024 and sell it today you would earn a total of  3.00  from holding Enterprise Group or generate 3.53% return on investment over 90 days.

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

POSCO Holdings  vs.  Enterprise Group

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 uncertain performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Enterprise Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Enterprise reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with POSCO Holdings and Enterprise

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

The idea behind POSCO Holdings and Enterprise Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.