Correlation Between Nam Kim and Materials Petroleum

Can any of the company-specific risk be diversified away by investing in both Nam Kim and Materials Petroleum 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 Materials Petroleum 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 Materials Petroleum JSC, you can compare the effects of market volatilities on Nam Kim and Materials Petroleum 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 Materials Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Kim and Materials Petroleum.

Diversification Opportunities for Nam Kim and Materials Petroleum

0.41

Correlation Coefficient

Nam Kim  Materials Petroleum

Very weak diversification

The 3 months correlation between Nam and Materials is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Nam Kim Steel and Materials Petroleum JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Petroleum JSC 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 Materials Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Petroleum JSC has no effect on the direction of Nam Kim i.e., Nam Kim and Materials Petroleum go up and down completely randomly.

Pair Corralation between Nam Kim and Materials Petroleum

Assuming the 90 days trading horizon Nam Kim is expected to generate 3.97 times less return on investment than Materials Petroleum. But when comparing it to its historical volatility, Nam Kim Steel is 1.64 times less risky than Materials Petroleum. It trades about 0.05 of its potential returns per unit of risk. Materials Petroleum JSC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,633,333  in Materials Petroleum JSC on December 21, 2024 and sell it today you would earn a total of  366,667  from holding Materials Petroleum JSC or generate 13.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	61.02%
Values	Daily Returns

Nam Kim Steel  vs.  Materials Petroleum JSC

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 weak technical and fundamental indicators, Nam Kim may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Materials Petroleum JSC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Petroleum JSC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Materials Petroleum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nam Kim and Materials Petroleum

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

The idea behind Nam Kim Steel and Materials Petroleum JSC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.