Correlation Between Nam Kim and Viet Nam

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

Diversification Opportunities for Nam Kim and Viet Nam

0.44

Correlation Coefficient

Nam Kim  Viet Nam

Very weak diversification

The 3 months correlation between Nam and Viet is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nam Kim Steel and Viet Nam Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viet Nam Construction 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 Viet Nam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viet Nam Construction has no effect on the direction of Nam Kim i.e., Nam Kim and Viet Nam go up and down completely randomly.

Pair Corralation between Nam Kim and Viet Nam

Assuming the 90 days trading horizon Nam Kim Steel is expected to generate 0.73 times more return on investment than Viet Nam. However, Nam Kim Steel is 1.37 times less risky than Viet Nam. It trades about 0.03 of its potential returns per unit of risk. Viet Nam Construction is currently generating about 0.0 per unit of risk. If you would invest  1,475,000  in Nam Kim Steel on December 20, 2024 and sell it today you would earn a total of  40,000  from holding Nam Kim Steel or generate 2.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	54.24%
Values	Daily Returns

Nam Kim Steel  vs.  Viet Nam Construction

Nam Kim Steel

Risk-Adjusted Performance

Weak

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.

Viet Nam Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Viet Nam Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Viet Nam is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nam Kim and Viet Nam

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

The idea behind Nam Kim Steel and Viet Nam Construction 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 Stocks Directory module to find actively traded stocks across global markets.