Correlation Between Vietnam Rubber and Nam Kim

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

By analyzing existing cross correlation between Vietnam Rubber Group and Nam Kim Steel, you can compare the effects of market volatilities on Vietnam Rubber and Nam Kim 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 Vietnam Rubber with a short position of Nam Kim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vietnam Rubber and Nam Kim.

Diversification Opportunities for Vietnam Rubber and Nam Kim

0.87

Correlation Coefficient

Vietnam Rubber  Nam Kim

Very poor diversification

The 3 months correlation between Vietnam and Nam is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Rubber Group and Nam Kim Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Kim Steel and Vietnam Rubber 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 Vietnam Rubber Group are associated (or correlated) with Nam Kim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Kim Steel has no effect on the direction of Vietnam Rubber i.e., Vietnam Rubber and Nam Kim go up and down completely randomly.

Pair Corralation between Vietnam Rubber and Nam Kim

Assuming the 90 days trading horizon Vietnam Rubber Group is expected to generate 0.72 times more return on investment than Nam Kim. However, Vietnam Rubber Group is 1.38 times less risky than Nam Kim. It trades about 0.13 of its potential returns per unit of risk. Nam Kim Steel is currently generating about 0.05 per unit of risk. If you would invest  3,085,000  in Vietnam Rubber Group on December 21, 2024 and sell it today you would earn a total of  365,000  from holding Vietnam Rubber Group or generate 11.83% return on investment over 90 days.

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

Vietnam Rubber Group  vs.  Nam Kim Steel

Vietnam Rubber Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Rubber Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Rubber displayed solid returns over the last few months and may actually be approaching a breakup point.

Nam Kim Steel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nam Kim Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Nam Kim may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vietnam Rubber and Nam Kim

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

The idea behind Vietnam Rubber Group and Nam Kim Steel 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.