Correlation Between KGHM Polska and Nevada Copper

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

Diversification Opportunities for KGHM Polska and Nevada Copper

-0.53

Correlation Coefficient

KGHM Polska  Nevada Copper

Excellent diversification

The 3 months correlation between KGHM and Nevada is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Nevada Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevada Copper Corp 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 Nevada Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevada Copper Corp has no effect on the direction of KGHM Polska i.e., KGHM Polska and Nevada Copper go up and down completely randomly.

Pair Corralation between KGHM Polska and Nevada Copper

Assuming the 90 days horizon KGHM Polska Miedz is expected to generate 0.56 times more return on investment than Nevada Copper. However, KGHM Polska Miedz is 1.8 times less risky than Nevada Copper. It trades about 0.27 of its potential returns per unit of risk. Nevada Copper Corp is currently generating about -0.06 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	20.89%
Values	Daily Returns

KGHM Polska Miedz  vs.  Nevada Copper Corp

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.

Nevada Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with KGHM Polska and Nevada Copper

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

The idea behind KGHM Polska Miedz and Nevada Copper Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.