Correlation Between Amazon and KGHM Polska

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

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

Diversification Opportunities for Amazon and KGHM Polska

0.76

Correlation Coefficient

Amazon  KGHM Polska

Poor diversification

The 3 months correlation between Amazon and KGHM is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc 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 Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and KGHM Polska go up and down completely randomly.

Pair Corralation between Amazon and KGHM Polska

Given the investment horizon of 90 days Amazon is expected to generate 1.06 times less return on investment than KGHM Polska. But when comparing it to its historical volatility, Amazon Inc is 1.78 times less risky than KGHM Polska. It trades about 0.11 of its potential returns per unit of risk. KGHM Polska Miedz is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,890  in KGHM Polska Miedz on September 19, 2024 and sell it today you would earn a total of  999.00  from holding KGHM Polska Miedz or generate 34.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	35.89%
Values	Daily Returns

Amazon Inc  vs.  KGHM Polska Miedz

Amazon Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly stable basic indicators, KGHM Polska is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Amazon and KGHM Polska

The main advantage of trading using opposite Amazon and KGHM Polska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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 Amazon Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.