Correlation Between KGHM Polska and Drago Entertainment

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

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

Diversification Opportunities for KGHM Polska and Drago Entertainment

-0.32

Correlation Coefficient

KGHM Polska  Drago Entertainment

Very good diversification

The 3 months correlation between KGHM and Drago is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Drago entertainment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drago entertainment and KGHM Polska 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 KGHM Polska Miedz are associated (or correlated) with Drago Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drago entertainment has no effect on the direction of KGHM Polska i.e., KGHM Polska and Drago Entertainment go up and down completely randomly.

Pair Corralation between KGHM Polska and Drago Entertainment

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to under-perform the Drago Entertainment. In addition to that, KGHM Polska is 1.04 times more volatile than Drago entertainment SA. It trades about -0.05 of its total potential returns per unit of risk. Drago entertainment SA is currently generating about 0.0 per unit of volatility. If you would invest  2,190  in Drago entertainment SA on August 31, 2024 and sell it today you would lose (30.00) from holding Drago entertainment SA or give up 1.37% of portfolio value over 90 days.

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

KGHM Polska Miedz  vs.  Drago entertainment SA

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 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.

Drago entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Drago entertainment SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Drago Entertainment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with KGHM Polska and Drago Entertainment

The main advantage of trading using opposite KGHM Polska and Drago Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska position performs unexpectedly, Drago Entertainment 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 Drago Entertainment will offset losses from the drop in Drago Entertainment's long position.

The idea behind KGHM Polska Miedz and Drago entertainment SA 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.