Correlation Between KGHM Polska and CarsalesCom

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

Diversification Opportunities for KGHM Polska and CarsalesCom

-0.76

Correlation Coefficient

KGHM Polska  CarsalesCom

Pay attention - limited upside

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

Pair Corralation between KGHM Polska and CarsalesCom

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to generate 1.96 times more return on investment than CarsalesCom. However, KGHM Polska is 1.96 times more volatile than CarsalesCom. It trades about -0.04 of its potential returns per unit of risk. CarsalesCom is currently generating about -0.33 per unit of risk. If you would invest  2,952  in KGHM Polska Miedz on September 22, 2024 and sell it today you would lose (77.00) from holding KGHM Polska Miedz or give up 2.61% 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.  CarsalesCom

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CarsalesCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CarsalesCom is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KGHM Polska and CarsalesCom

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

The idea behind KGHM Polska Miedz and CarsalesCom 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.