Correlation Between Parex Resources and POSCO Holdings

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

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

Diversification Opportunities for Parex Resources and POSCO Holdings

-0.74

Correlation Coefficient

Parex Resources  POSCO Holdings

Pay attention - limited upside

The 3 months correlation between Parex and POSCO is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Parex Resources and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Parex Resources 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 Parex Resources 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 Parex Resources i.e., Parex Resources and POSCO Holdings go up and down completely randomly.

Pair Corralation between Parex Resources and POSCO Holdings

Assuming the 90 days horizon Parex Resources is expected to generate 1.24 times more return on investment than POSCO Holdings. However, Parex Resources is 1.24 times more volatile than POSCO Holdings. It trades about -0.08 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.12 per unit of risk. If you would invest  1,698  in Parex Resources on September 14, 2024 and sell it today you would lose (788.00) from holding Parex Resources or give up 46.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Parex Resources  vs.  POSCO Holdings

Parex Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parex Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Parex Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Parex Resources and POSCO Holdings

The main advantage of trading using opposite Parex Resources and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parex Resources 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 Parex Resources 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.