Correlation Between Nam Kim and Danang Rubber

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

Diversification Opportunities for Nam Kim and Danang Rubber

-0.21

Correlation Coefficient

Nam Kim  Danang Rubber

Very good diversification

The 3 months correlation between Nam and Danang is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nam Kim Steel and Danang Rubber JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danang Rubber JSC 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 Danang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danang Rubber JSC has no effect on the direction of Nam Kim i.e., Nam Kim and Danang Rubber go up and down completely randomly.

Pair Corralation between Nam Kim and Danang Rubber

Assuming the 90 days trading horizon Nam Kim Steel is expected to under-perform the Danang Rubber. In addition to that, Nam Kim is 1.96 times more volatile than Danang Rubber JSC. It trades about -0.22 of its total potential returns per unit of risk. Danang Rubber JSC is currently generating about -0.06 per unit of volatility. If you would invest  3,101,525  in Danang Rubber JSC on October 1, 2024 and sell it today you would lose (181,525) from holding Danang Rubber JSC or give up 5.85% of portfolio value over 90 days.

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

Nam Kim Steel  vs.  Danang Rubber JSC

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

Danang Rubber JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danang Rubber JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Danang Rubber 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 Danang Rubber

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

The idea behind Nam Kim Steel and Danang Rubber JSC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.