Correlation Between Highlight Communications and KGHM Polska

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

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

Diversification Opportunities for Highlight Communications and KGHM Polska

-0.74

Correlation Coefficient

Highlight Communications  KGHM Polska

Pay attention - limited upside

The 3 months correlation between Highlight and KGHM is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG 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 Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and KGHM Polska go up and down completely randomly.

Pair Corralation between Highlight Communications and KGHM Polska

Assuming the 90 days trading horizon Highlight Communications AG is expected to under-perform the KGHM Polska. In addition to that, Highlight Communications is 1.24 times more volatile than KGHM Polska Miedz. It trades about -0.06 of its total potential returns per unit of risk. KGHM Polska Miedz is currently generating about 0.03 per unit of volatility. If you would invest  2,389  in KGHM Polska Miedz on October 6, 2024 and sell it today you would earn a total of  359.00  from holding KGHM Polska Miedz or generate 15.03% return on investment over 90 days.

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

Highlight Communications AG  vs.  KGHM Polska Miedz

Highlight Communications

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Highlight Communications unveiled 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 fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Highlight Communications and KGHM Polska

The main advantage of trading using opposite Highlight Communications and KGHM Polska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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 Highlight Communications AG 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.