Correlation Between First Quantum and KGHM Polska

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

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

Diversification Opportunities for First Quantum and KGHM Polska

-0.4

Correlation Coefficient

First Quantum  KGHM Polska

Very good diversification

The 3 months correlation between First and KGHM is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Quantum Minerals 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 First Quantum 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 First Quantum Minerals 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 First Quantum i.e., First Quantum and KGHM Polska go up and down completely randomly.

Pair Corralation between First Quantum and KGHM Polska

Assuming the 90 days horizon First Quantum Minerals is expected to generate 1.05 times more return on investment than KGHM Polska. However, First Quantum is 1.05 times more volatile than KGHM Polska Miedz. It trades about 0.04 of its potential returns per unit of risk. KGHM Polska Miedz is currently generating about -0.08 per unit of risk. If you would invest  1,176  in First Quantum Minerals on September 20, 2024 and sell it today you would earn a total of  56.00  from holding First Quantum Minerals or generate 4.76% return on investment over 90 days.

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

First Quantum Minerals  vs.  KGHM Polska Miedz

First Quantum Minerals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, First Quantum 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 uncertain performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with First Quantum and KGHM Polska

The main advantage of trading using opposite First Quantum and KGHM Polska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Quantum 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 First Quantum Minerals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.