Correlation Between Nam Kim and Transimex Transportation

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

Diversification Opportunities for Nam Kim and Transimex Transportation

0.61

Correlation Coefficient

Nam Kim  Transimex Transportation

Poor diversification

The 3 months correlation between Nam and Transimex is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nam Kim Steel and Transimex Transportation JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transimex Transportation 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 Transimex Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transimex Transportation has no effect on the direction of Nam Kim i.e., Nam Kim and Transimex Transportation go up and down completely randomly.

Pair Corralation between Nam Kim and Transimex Transportation

Assuming the 90 days trading horizon Nam Kim Steel is expected to under-perform the Transimex Transportation. But the stock apears to be less risky and, when comparing its historical volatility, Nam Kim Steel is 1.85 times less risky than Transimex Transportation. The stock trades about -0.08 of its potential returns per unit of risk. The Transimex Transportation JSC is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,800,000  in Transimex Transportation JSC on September 15, 2024 and sell it today you would lose (80,000) from holding Transimex Transportation JSC or give up 4.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	64.62%
Values	Daily Returns

Nam Kim Steel  vs.  Transimex Transportation 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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Transimex Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Nam Kim Steel and Transimex Transportation 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.