Correlation Between Nam Kim and Southern Rubber
Can any of the company-specific risk be diversified away by investing in both Nam Kim and Southern 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 Southern 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 Southern Rubber Industry, you can compare the effects of market volatilities on Nam Kim and Southern 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 Southern Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nam Kim and Southern Rubber.
Diversification Opportunities for Nam Kim and Southern Rubber
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nam and Southern is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nam Kim Steel and Southern Rubber Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Rubber Industry 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 Southern Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Rubber Industry has no effect on the direction of Nam Kim i.e., Nam Kim and Southern Rubber go up and down completely randomly.
Pair Corralation between Nam Kim and Southern Rubber
Assuming the 90 days trading horizon Nam Kim Steel is expected to under-perform the Southern Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Nam Kim Steel is 1.48 times less risky than Southern Rubber. The stock trades about -0.08 of its potential returns per unit of risk. The Southern Rubber Industry is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,270,000 in Southern Rubber Industry on September 12, 2024 and sell it today you would earn a total of 130,000 from holding Southern Rubber Industry or generate 10.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nam Kim Steel vs. Southern Rubber Industry
Performance |
| Timeline |
| Nam Kim Steel |
| Southern Rubber Industry |
Nam Kim and Southern Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nam Kim and Southern Rubber
The main advantage of trading using opposite Nam Kim and Southern Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nam Kim position performs unexpectedly, Southern 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 Southern Rubber will offset losses from the drop in Southern Rubber's long position.The idea behind Nam Kim Steel and Southern Rubber Industry 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.| Southern Rubber vs. Transport and Industry | Southern Rubber vs. Techcom Vietnam REIT | Southern Rubber vs. Vincom Retail JSC | Southern Rubber vs. Transimex Transportation JSC |
Check out your portfolio center.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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