Correlation Between POSCO Holdings and USA Recycling

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

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

Diversification Opportunities for POSCO Holdings and USA Recycling

0.71

Correlation Coefficient

POSCO Holdings  USA Recycling

Poor diversification

The 3 months correlation between POSCO and USA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and USA Recycling Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Recycling Industries 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 USA Recycling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Recycling Industries has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and USA Recycling go up and down completely randomly.

Pair Corralation between POSCO Holdings and USA Recycling

Considering the 90-day investment horizon POSCO Holdings is expected to generate 0.2 times more return on investment than USA Recycling. However, POSCO Holdings is 5.04 times less risky than USA Recycling. It trades about -0.32 of its potential returns per unit of risk. USA Recycling Industries is currently generating about -0.12 per unit of risk. If you would invest  6,999  in POSCO Holdings on September 29, 2024 and sell it today you would lose (2,662) from holding POSCO Holdings or give up 38.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

POSCO Holdings  vs.  USA Recycling Industries

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.

USA Recycling Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USA Recycling Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with POSCO Holdings and USA Recycling

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

The idea behind POSCO Holdings and USA Recycling Industries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.