Correlation Between KGHM Polska and Aurubis AG

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

Diversification Opportunities for KGHM Polska and Aurubis AG

-0.79

Correlation Coefficient

KGHM Polska  Aurubis AG

Pay attention - limited upside

The 3 months correlation between KGHM and Aurubis is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Aurubis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurubis AG 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 Aurubis AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurubis AG has no effect on the direction of KGHM Polska i.e., KGHM Polska and Aurubis AG go up and down completely randomly.

Pair Corralation between KGHM Polska and Aurubis AG

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to under-perform the Aurubis AG. But the stock apears to be less risky and, when comparing its historical volatility, KGHM Polska Miedz is 1.1 times less risky than Aurubis AG. The stock trades about -0.08 of its potential returns per unit of risk. The Aurubis AG is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,925  in Aurubis AG on September 19, 2024 and sell it today you would lose (55.00) from holding Aurubis AG or give up 0.69% of portfolio value over 90 days.

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

KGHM Polska Miedz  vs.  Aurubis AG

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.

Aurubis AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aurubis AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aurubis AG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KGHM Polska and Aurubis AG

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

The idea behind KGHM Polska Miedz and Aurubis AG 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.