Correlation Between Bank of America and KGHM Polska

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

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

Diversification Opportunities for Bank of America and KGHM Polska

0.87

Correlation Coefficient

Bank of America  KGHM Polska

Very poor diversification

The 3 months correlation between Bank and KGHM is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America 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 Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and KGHM Polska go up and down completely randomly.

Pair Corralation between Bank of America and KGHM Polska

If you would invest  3,889  in KGHM Polska Miedz on September 20, 2024 and sell it today you would earn a total of  0.00  from holding KGHM Polska Miedz or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.55%
Values	Daily Returns

Bank of America  vs.  KGHM Polska Miedz

Bank of America

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Bank of America and KGHM Polska

The main advantage of trading using opposite Bank of America and KGHM Polska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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 Bank of America 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.