Correlation Between KGHM Polska and Bell Copper

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

Diversification Opportunities for KGHM Polska and Bell Copper

-0.48

Correlation Coefficient

KGHM Polska  Bell Copper

Very good diversification

The 3 months correlation between KGHM and Bell is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Bell Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bell Copper 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 Bell Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bell Copper has no effect on the direction of KGHM Polska i.e., KGHM Polska and Bell Copper go up and down completely randomly.

Pair Corralation between KGHM Polska and Bell Copper

Assuming the 90 days horizon KGHM Polska Miedz is expected to generate 0.39 times more return on investment than Bell Copper. However, KGHM Polska Miedz is 2.57 times less risky than Bell Copper. It trades about 0.27 of its potential returns per unit of risk. Bell Copper is currently generating about 0.02 per unit of risk. If you would invest  2,592  in KGHM Polska Miedz on September 20, 2024 and sell it today you would earn a total of  1,297  from holding KGHM Polska Miedz or generate 50.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	13.31%
Values	Daily Returns

KGHM Polska Miedz  vs.  Bell Copper

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 nearly stable basic indicators, KGHM Polska is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bell Copper

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bell Copper are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Bell Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KGHM Polska and Bell Copper

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

The idea behind KGHM Polska Miedz and Bell Copper 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.