Correlation Between KGHM Polska and ELEMENT 29

Can any of the company-specific risk be diversified away by investing in both KGHM Polska and ELEMENT 29 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 ELEMENT 29 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 ELEMENT 29 RESOURCES, you can compare the effects of market volatilities on KGHM Polska and ELEMENT 29 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 ELEMENT 29. Check out your portfolio center. Please also check ongoing floating volatility patterns of KGHM Polska and ELEMENT 29.

Diversification Opportunities for KGHM Polska and ELEMENT 29

-0.76

Correlation Coefficient

KGHM Polska  ELEMENT 29

Pay attention - limited upside

The 3 months correlation between KGHM and ELEMENT is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and ELEMENT 29 RESOURCES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELEMENT 29 RESOURCES 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 ELEMENT 29. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELEMENT 29 RESOURCES has no effect on the direction of KGHM Polska i.e., KGHM Polska and ELEMENT 29 go up and down completely randomly.

Pair Corralation between KGHM Polska and ELEMENT 29

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to under-perform the ELEMENT 29. But the stock apears to be less risky and, when comparing its historical volatility, KGHM Polska Miedz is 3.17 times less risky than ELEMENT 29. The stock trades about -0.11 of its potential returns per unit of risk. The ELEMENT 29 RESOURCES is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  23.00  in ELEMENT 29 RESOURCES on October 23, 2024 and sell it today you would earn a total of  12.00  from holding ELEMENT 29 RESOURCES or generate 52.17% return on investment over 90 days.

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

KGHM Polska Miedz  vs.  ELEMENT 29 RESOURCES

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.

ELEMENT 29 RESOURCES

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ELEMENT 29 RESOURCES are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ELEMENT 29 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KGHM Polska and ELEMENT 29

The main advantage of trading using opposite KGHM Polska and ELEMENT 29 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska position performs unexpectedly, ELEMENT 29 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 ELEMENT 29 will offset losses from the drop in ELEMENT 29's long position.

The idea behind KGHM Polska Miedz and ELEMENT 29 RESOURCES 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.