Correlation Between Enter Air and KGHM Polska

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

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

Diversification Opportunities for Enter Air and KGHM Polska

0.7

Correlation Coefficient

Enter Air  KGHM Polska

Poor diversification

The 3 months correlation between Enter and KGHM is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Enter Air SA 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 Enter Air 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 Enter Air SA 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 Enter Air i.e., Enter Air and KGHM Polska go up and down completely randomly.

Pair Corralation between Enter Air and KGHM Polska

Assuming the 90 days trading horizon Enter Air SA is expected to under-perform the KGHM Polska. In addition to that, Enter Air is 1.04 times more volatile than KGHM Polska Miedz. It trades about -0.05 of its total potential returns per unit of risk. KGHM Polska Miedz is currently generating about 0.22 per unit of volatility. If you would invest  11,735  in KGHM Polska Miedz on October 26, 2024 and sell it today you would earn a total of  585.00  from holding KGHM Polska Miedz or generate 4.99% return on investment over 90 days.

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

Enter Air SA  vs.  KGHM Polska Miedz

Enter Air SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enter Air SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Enter Air and KGHM Polska

The main advantage of trading using opposite Enter Air and KGHM Polska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enter Air 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 Enter Air SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.