Correlation Between POSCO Holdings and Nucor

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

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

Diversification Opportunities for POSCO Holdings and Nucor

0.12

Correlation Coefficient

POSCO Holdings  Nucor

Average diversification

The 3 months correlation between POSCO and Nucor is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor 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 Nucor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Nucor go up and down completely randomly.

Pair Corralation between POSCO Holdings and Nucor

Assuming the 90 days horizon POSCO Holdings is expected to under-perform the Nucor. But the stock apears to be less risky and, when comparing its historical volatility, POSCO Holdings is 1.2 times less risky than Nucor. The stock trades about -0.19 of its potential returns per unit of risk. The Nucor is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  13,249  in Nucor on September 23, 2024 and sell it today you would lose (2,227) from holding Nucor or give up 16.81% of portfolio value over 90 days.

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

POSCO Holdings  vs.  Nucor

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nucor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nucor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with POSCO Holdings and Nucor

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

The idea behind POSCO Holdings and Nucor 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.