Correlation Between KGHM Polska and Dino Polska

Can any of the company-specific risk be diversified away by investing in both KGHM Polska and Dino 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 KGHM Polska and Dino Polska 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 Dino Polska SA, you can compare the effects of market volatilities on KGHM Polska and Dino 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 KGHM Polska with a short position of Dino Polska. Check out your portfolio center. Please also check ongoing floating volatility patterns of KGHM Polska and Dino Polska.

Diversification Opportunities for KGHM Polska and Dino Polska

0.81

Correlation Coefficient

KGHM Polska  Dino Polska

Very poor diversification

The 3 months correlation between KGHM and Dino is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Dino Polska SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dino Polska SA 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 Dino Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dino Polska SA has no effect on the direction of KGHM Polska i.e., KGHM Polska and Dino Polska go up and down completely randomly.

Pair Corralation between KGHM Polska and Dino Polska

Assuming the 90 days trading horizon KGHM Polska is expected to generate 1.23 times less return on investment than Dino Polska. In addition to that, KGHM Polska is 1.17 times more volatile than Dino Polska SA. It trades about 0.1 of its total potential returns per unit of risk. Dino Polska SA is currently generating about 0.15 per unit of volatility. If you would invest  38,980  in Dino Polska SA on December 29, 2024 and sell it today you would earn a total of  6,620  from holding Dino Polska SA or generate 16.98% return on investment over 90 days.

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

KGHM Polska Miedz  vs.  Dino Polska SA

KGHM Polska Miedz

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KGHM Polska Miedz are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, KGHM Polska reported solid returns over the last few months and may actually be approaching a breakup point.

Dino Polska SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dino Polska SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Dino Polska reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KGHM Polska and Dino Polska

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

The idea behind KGHM Polska Miedz and Dino Polska 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.