Correlation Between Nam Kim and Petrovietnam Technical

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

Diversification Opportunities for Nam Kim and Petrovietnam Technical

0.67

Correlation Coefficient

Nam Kim  Petrovietnam Technical

Poor diversification

The 3 months correlation between Nam and Petrovietnam is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nam Kim Steel and Petrovietnam Technical Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrovietnam Technical 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 Petrovietnam Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrovietnam Technical has no effect on the direction of Nam Kim i.e., Nam Kim and Petrovietnam Technical go up and down completely randomly.

Pair Corralation between Nam Kim and Petrovietnam Technical

Assuming the 90 days trading horizon Nam Kim Steel is expected to under-perform the Petrovietnam Technical. In addition to that, Nam Kim is 2.44 times more volatile than Petrovietnam Technical Services. It trades about -0.27 of its total potential returns per unit of risk. Petrovietnam Technical Services is currently generating about -0.18 per unit of volatility. If you would invest  3,739,257  in Petrovietnam Technical Services on October 7, 2024 and sell it today you would lose (359,257) from holding Petrovietnam Technical Services or give up 9.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

Nam Kim Steel  vs.  Petrovietnam Technical Service

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Petrovietnam Technical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrovietnam Technical Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nam Kim and Petrovietnam Technical

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

The idea behind Nam Kim Steel and Petrovietnam Technical Services 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.