Correlation Between Vercom SA and KGHM Polska

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

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

Diversification Opportunities for Vercom SA and KGHM Polska

-0.45

Correlation Coefficient

Vercom SA  KGHM Polska

Very good diversification

The 3 months correlation between Vercom and KGHM is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vercom 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 Vercom SA 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 Vercom 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 Vercom SA i.e., Vercom SA and KGHM Polska go up and down completely randomly.

Pair Corralation between Vercom SA and KGHM Polska

Assuming the 90 days trading horizon Vercom SA is expected to under-perform the KGHM Polska. But the stock apears to be less risky and, when comparing its historical volatility, Vercom SA is 1.05 times less risky than KGHM Polska. The stock trades about -0.06 of its potential returns per unit of risk. The KGHM Polska Miedz is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11,500  in KGHM Polska Miedz on December 29, 2024 and sell it today you would earn a total of  1,485  from holding KGHM Polska Miedz or generate 12.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Vercom SA  vs.  KGHM Polska Miedz

Vercom SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vercom SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

KGHM Polska Miedz

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KGHM Polska Miedz are ranked lower than 7 (%) 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 Vercom SA and KGHM Polska

The main advantage of trading using opposite Vercom SA and KGHM Polska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vercom SA 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 Vercom 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..