Correlation Between KGHM Polska and Poznanska Korporacja

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

Diversification Opportunities for KGHM Polska and Poznanska Korporacja

0.71

Correlation Coefficient

KGHM Polska  Poznanska Korporacja

Poor diversification

The 3 months correlation between KGHM and Poznanska is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Poznanska Korporacja Budowlana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poznanska Korporacja 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 Poznanska Korporacja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poznanska Korporacja has no effect on the direction of KGHM Polska i.e., KGHM Polska and Poznanska Korporacja go up and down completely randomly.

Pair Corralation between KGHM Polska and Poznanska Korporacja

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to generate 0.98 times more return on investment than Poznanska Korporacja. However, KGHM Polska Miedz is 1.02 times less risky than Poznanska Korporacja. It trades about 0.1 of its potential returns per unit of risk. Poznanska Korporacja Budowlana is currently generating about 0.07 per unit of risk. If you would invest  11,500  in KGHM Polska Miedz on December 30, 2024 and sell it today you would earn a total of  1,485  from holding KGHM Polska Miedz or generate 12.91% return on investment over 90 days.

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

KGHM Polska Miedz  vs.  Poznanska Korporacja Budowlana

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.

Poznanska Korporacja

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Poznanska Korporacja Budowlana are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Poznanska Korporacja may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KGHM Polska and Poznanska Korporacja

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

The idea behind KGHM Polska Miedz and Poznanska Korporacja Budowlana 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.