Correlation Between Nam Kim and Vietnam Rubber

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

Diversification Opportunities for Nam Kim and Vietnam Rubber

0.87

Correlation Coefficient

Nam Kim  Vietnam Rubber

Very poor diversification

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

Pair Corralation between Nam Kim and Vietnam Rubber

Assuming the 90 days trading horizon Nam Kim is expected to generate 1.91 times less return on investment than Vietnam Rubber. In addition to that, Nam Kim is 1.38 times more volatile than Vietnam Rubber Group. It trades about 0.05 of its total potential returns per unit of risk. Vietnam Rubber Group is currently generating about 0.13 per unit of volatility. 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

Nam Kim Steel  vs.  Vietnam Rubber Group

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.

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.

Pair Trading with Nam Kim and Vietnam Rubber

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

The idea behind Nam Kim Steel and Vietnam Rubber Group 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.