Correlation Between Mlk Foods and KGHM Polska

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

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

Diversification Opportunities for Mlk Foods and KGHM Polska

0.82

Correlation Coefficient

Mlk Foods  KGHM Polska

Very poor diversification

The 3 months correlation between Mlk and KGHM is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Mlk Foods Public 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 Mlk Foods 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 Mlk Foods Public 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 Mlk Foods i.e., Mlk Foods and KGHM Polska go up and down completely randomly.

Pair Corralation between Mlk Foods and KGHM Polska

Assuming the 90 days trading horizon Mlk Foods Public is expected to generate 4.76 times more return on investment than KGHM Polska. However, Mlk Foods is 4.76 times more volatile than KGHM Polska Miedz. It trades about 0.19 of its potential returns per unit of risk. KGHM Polska Miedz is currently generating about 0.16 per unit of risk. If you would invest  116.00  in Mlk Foods Public on December 26, 2024 and sell it today you would earn a total of  154.00  from holding Mlk Foods Public or generate 132.76% return on investment over 90 days.

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

Mlk Foods Public  vs.  KGHM Polska Miedz

Mlk Foods Public

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mlk Foods Public are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Mlk Foods reported solid returns over the last few months and may actually be approaching a breakup point.

KGHM Polska Miedz

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KGHM Polska Miedz are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, KGHM Polska reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mlk Foods and KGHM Polska

The main advantage of trading using opposite Mlk Foods and KGHM Polska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mlk Foods 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 Mlk Foods Public 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.