Correlation Between KGHM Polska and Comp SA

Can any of the company-specific risk be diversified away by investing in both KGHM Polska and Comp SA 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 KGHM Polska and Comp SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KGHM Polska Miedz and Comp SA, you can compare the effects of market volatilities on KGHM Polska and Comp SA 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 KGHM Polska with a short position of Comp SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KGHM Polska and Comp SA.

Diversification Opportunities for KGHM Polska and Comp SA

-0.59

Correlation Coefficient

KGHM Polska  Comp SA

Excellent diversification

The 3 months correlation between KGHM and Comp is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Comp SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comp SA and KGHM Polska 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 KGHM Polska Miedz are associated (or correlated) with Comp SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comp SA has no effect on the direction of KGHM Polska i.e., KGHM Polska and Comp SA go up and down completely randomly.

Pair Corralation between KGHM Polska and Comp SA

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to under-perform the Comp SA. In addition to that, KGHM Polska is 1.21 times more volatile than Comp SA. It trades about -0.03 of its total potential returns per unit of risk. Comp SA is currently generating about 0.13 per unit of volatility. If you would invest  11,500  in Comp SA on September 13, 2024 and sell it today you would earn a total of  1,750  from holding Comp SA or generate 15.22% return on investment over 90 days.

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

KGHM Polska Miedz  vs.  Comp SA

KGHM Polska Miedz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KGHM Polska Miedz has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, KGHM Polska is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Comp SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Comp SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Comp SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KGHM Polska and Comp SA

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

The idea behind KGHM Polska Miedz and Comp SA 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.