Correlation Between Asseco Business and KGHM Polska

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

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

Diversification Opportunities for Asseco Business and KGHM Polska

0.39

Correlation Coefficient

Asseco Business  KGHM Polska

Weak diversification

The 3 months correlation between Asseco and KGHM is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Asseco Business Solutions and KGHM Polska Miedz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KGHM Polska Miedz and Asseco Business 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 Asseco Business Solutions are associated (or correlated) with KGHM Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KGHM Polska Miedz has no effect on the direction of Asseco Business i.e., Asseco Business and KGHM Polska go up and down completely randomly.

Pair Corralation between Asseco Business and KGHM Polska

Assuming the 90 days trading horizon Asseco Business Solutions is expected to generate 1.03 times more return on investment than KGHM Polska. However, Asseco Business is 1.03 times more volatile than KGHM Polska Miedz. It trades about 0.25 of its potential returns per unit of risk. KGHM Polska Miedz is currently generating about 0.07 per unit of risk. If you would invest  5,100  in Asseco Business Solutions on November 29, 2024 and sell it today you would earn a total of  1,680  from holding Asseco Business Solutions or generate 32.94% return on investment over 90 days.

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

Asseco Business Solutions  vs.  KGHM Polska Miedz

Asseco Business Solutions

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asseco Business Solutions are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Asseco Business reported solid returns over the last few months and may actually be approaching a breakup point.

KGHM Polska Miedz

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KGHM Polska Miedz are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, KGHM Polska may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Asseco Business and KGHM Polska

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

The idea behind Asseco Business Solutions and KGHM Polska Miedz 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.