Correlation Between POSCO Holdings and Endesa SA

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

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

Diversification Opportunities for POSCO Holdings and Endesa SA

-0.73

Correlation Coefficient

POSCO Holdings  Endesa SA

Pay attention - limited upside

The 3 months correlation between POSCO and Endesa is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and Endesa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA 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 Endesa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endesa SA has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and Endesa SA go up and down completely randomly.

Pair Corralation between POSCO Holdings and Endesa SA

Considering the 90-day investment horizon POSCO Holdings is expected to under-perform the Endesa SA. In addition to that, POSCO Holdings is 2.25 times more volatile than Endesa SA. It trades about -0.14 of its total potential returns per unit of risk. Endesa SA is currently generating about 0.18 per unit of volatility. If you would invest  1,930  in Endesa SA on September 4, 2024 and sell it today you would earn a total of  270.00  from holding Endesa SA or generate 13.99% return on investment over 90 days.

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

POSCO Holdings  vs.  Endesa SA

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.

Endesa SA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Endesa SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with POSCO Holdings and Endesa SA

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

The idea behind POSCO Holdings and Endesa SA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.