Correlation Between POSCO Holdings and Algoma Steel

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

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

Diversification Opportunities for POSCO Holdings and Algoma Steel

-0.31

Correlation Coefficient

POSCO Holdings  Algoma Steel

Very good diversification

The 3 months correlation between POSCO and Algoma is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Algoma Steel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Steel 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 Algoma Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Steel Group has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Algoma Steel go up and down completely randomly.

Pair Corralation between POSCO Holdings and Algoma Steel

Considering the 90-day investment horizon POSCO Holdings is expected to generate 0.67 times more return on investment than Algoma Steel. However, POSCO Holdings is 1.49 times less risky than Algoma Steel. It trades about -0.2 of its potential returns per unit of risk. Algoma Steel Group is currently generating about -0.28 per unit of risk. If you would invest  5,238  in POSCO Holdings on September 15, 2024 and sell it today you would lose (568.00) from holding POSCO Holdings or give up 10.84% of portfolio value over 90 days.

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

POSCO Holdings  vs.  Algoma Steel 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 unfluctuating 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.

Algoma Steel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algoma Steel Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Algoma Steel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with POSCO Holdings and Algoma Steel

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

The idea behind POSCO Holdings and Algoma Steel 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.

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 CEOs Directory module to screen CEOs from public companies around the world.