Correlation Between Nam Kim and PVI Reinsurance

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

Diversification Opportunities for Nam Kim and PVI Reinsurance

0.14

Correlation Coefficient

Nam Kim  PVI Reinsurance

Average diversification

The 3 months correlation between Nam and PVI is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nam Kim Steel and PVI Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVI Reinsurance Corp 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 PVI Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVI Reinsurance Corp has no effect on the direction of Nam Kim i.e., Nam Kim and PVI Reinsurance go up and down completely randomly.

Pair Corralation between Nam Kim and PVI Reinsurance

Assuming the 90 days trading horizon Nam Kim is expected to generate 3.36 times less return on investment than PVI Reinsurance. But when comparing it to its historical volatility, Nam Kim Steel is 1.16 times less risky than PVI Reinsurance. It trades about 0.03 of its potential returns per unit of risk. PVI Reinsurance Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,840,000  in PVI Reinsurance Corp on December 20, 2024 and sell it today you would earn a total of  190,000  from holding PVI Reinsurance Corp or generate 10.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.21%
Values	Daily Returns

Nam Kim Steel  vs.  PVI Reinsurance Corp

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 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Nam Kim is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PVI Reinsurance Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PVI Reinsurance Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, PVI Reinsurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nam Kim and PVI Reinsurance

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

The idea behind Nam Kim Steel and PVI Reinsurance Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.