Correlation Between Nam Kim and Alphanam

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

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

Diversification Opportunities for Nam Kim and Alphanam

0.75

Correlation Coefficient

Nam Kim  Alphanam

Poor diversification

The 3 months correlation between Nam and Alphanam is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nam Kim Steel and Alphanam ME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphanam ME and Nam Kim 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 Nam Kim Steel are associated (or correlated) with Alphanam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphanam ME has no effect on the direction of Nam Kim i.e., Nam Kim and Alphanam go up and down completely randomly.

Pair Corralation between Nam Kim and Alphanam

Assuming the 90 days trading horizon Nam Kim Steel is expected to under-perform the Alphanam. In addition to that, Nam Kim is 1.3 times more volatile than Alphanam ME. It trades about -0.23 of its total potential returns per unit of risk. Alphanam ME is currently generating about -0.09 per unit of volatility. If you would invest  500,000  in Alphanam ME on September 21, 2024 and sell it today you would lose (30,000) from holding Alphanam ME or give up 6.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	72.73%
Values	Daily Returns

Nam Kim Steel  vs.  Alphanam ME

Nam Kim Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nam Kim Steel 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Alphanam ME

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alphanam ME 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nam Kim and Alphanam

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

The idea behind Nam Kim Steel and Alphanam ME 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.