Correlation Between HNX 30 and Nam Kim

Can any of the company-specific risk be diversified away by investing in both HNX 30 and Nam Kim 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 HNX 30 and Nam Kim into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HNX 30 and Nam Kim Steel, you can compare the effects of market volatilities on HNX 30 and Nam Kim 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 HNX 30 with a short position of Nam Kim. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNX 30 and Nam Kim.

Diversification Opportunities for HNX 30 and Nam Kim

0.51

Correlation Coefficient

HNX 30  Nam Kim

Very weak diversification

The 3 months correlation between HNX and Nam is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding HNX 30 and Nam Kim Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Kim Steel and HNX 30 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 HNX 30 are associated (or correlated) with Nam Kim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Kim Steel has no effect on the direction of HNX 30 i.e., HNX 30 and Nam Kim go up and down completely randomly.

Pair Corralation between HNX 30 and Nam Kim

Assuming the 90 days trading horizon HNX 30 is expected to generate 0.3 times more return on investment than Nam Kim. However, HNX 30 is 3.3 times less risky than Nam Kim. It trades about -0.11 of its potential returns per unit of risk. Nam Kim Steel is currently generating about -0.22 per unit of risk. If you would invest  51,348  in HNX 30 on September 29, 2024 and sell it today you would lose (2,938) from holding HNX 30 or give up 5.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

HNX 30  vs.  Nam Kim Steel

Pair Trading with HNX 30 and Nam Kim

The main advantage of trading using opposite HNX 30 and Nam Kim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNX 30 position performs unexpectedly, Nam Kim 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 Nam Kim will offset losses from the drop in Nam Kim's long position.

The idea behind HNX 30 and Nam Kim Steel 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.