Correlation Between POSCO M and Kukil Metal

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

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

Diversification Opportunities for POSCO M and Kukil Metal

0.94

Correlation Coefficient

POSCO M  Kukil Metal

Almost no diversification

The 3 months correlation between POSCO and Kukil is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding POSCO M TECH Co and Kukil Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukil Metal and POSCO M 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 M TECH Co are associated (or correlated) with Kukil Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kukil Metal has no effect on the direction of POSCO M i.e., POSCO M and Kukil Metal go up and down completely randomly.

Pair Corralation between POSCO M and Kukil Metal

Assuming the 90 days trading horizon POSCO M TECH Co is expected to under-perform the Kukil Metal. In addition to that, POSCO M is 1.93 times more volatile than Kukil Metal Co. It trades about -0.17 of its total potential returns per unit of risk. Kukil Metal Co is currently generating about -0.2 per unit of volatility. If you would invest  207,000  in Kukil Metal Co on August 31, 2024 and sell it today you would lose (31,000) from holding Kukil Metal Co or give up 14.98% of portfolio value over 90 days.

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

POSCO M TECH Co  vs.  Kukil Metal Co

POSCO M TECH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POSCO M TECH Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Kukil Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kukil Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with POSCO M and Kukil Metal

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

The idea behind POSCO M TECH Co and Kukil Metal Co 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.