Correlation Between Bank Millennium and KGHM Polska

Can any of the company-specific risk be diversified away by investing in both Bank Millennium and KGHM Polska 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 Bank Millennium and KGHM Polska into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank Millennium SA and KGHM Polska Miedz, you can compare the effects of market volatilities on Bank Millennium and KGHM Polska 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 Bank Millennium with a short position of KGHM Polska. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Millennium and KGHM Polska.

Diversification Opportunities for Bank Millennium and KGHM Polska

-0.58

Correlation Coefficient

Bank Millennium  KGHM Polska

Excellent diversification

The 3 months correlation between Bank and KGHM is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bank Millennium SA and KGHM Polska Miedz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KGHM Polska Miedz and Bank Millennium 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 Bank Millennium SA are associated (or correlated) with KGHM Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KGHM Polska Miedz has no effect on the direction of Bank Millennium i.e., Bank Millennium and KGHM Polska go up and down completely randomly.

Pair Corralation between Bank Millennium and KGHM Polska

Assuming the 90 days trading horizon Bank Millennium SA is expected to generate 1.32 times more return on investment than KGHM Polska. However, Bank Millennium is 1.32 times more volatile than KGHM Polska Miedz. It trades about 0.07 of its potential returns per unit of risk. KGHM Polska Miedz is currently generating about -0.14 per unit of risk. If you would invest  902.00  in Bank Millennium SA on October 11, 2024 and sell it today you would earn a total of  40.00  from holding Bank Millennium SA or generate 4.43% return on investment over 90 days.

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

Bank Millennium SA  vs.  KGHM Polska Miedz

Bank Millennium SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Millennium SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank Millennium reported solid returns over the last few months and may actually be approaching a breakup point.

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. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Bank Millennium and KGHM Polska

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

The idea behind Bank Millennium SA and KGHM Polska Miedz 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.