Correlation Between GM and KGHM Polska
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and KGHM Polska into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and KGHM Polska Miedz, you can compare the effects of market volatilities on GM 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 GM with a short position of KGHM Polska. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and KGHM Polska.
Diversification Opportunities for GM and KGHM Polska
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GM and KGHM is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and KGHM Polska go up and down completely randomly.
Pair Corralation between GM and KGHM Polska
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.63 times more return on investment than KGHM Polska. However, General Motors is 1.58 times less risky than KGHM Polska. It trades about 0.1 of its potential returns per unit of risk. KGHM Polska Miedz is currently generating about -0.36 per unit of risk. If you would invest 5,373 in General Motors on August 23, 2024 and sell it today you would earn a total of 195.00 from holding General Motors or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
General Motors vs. KGHM Polska Miedz
Performance |
| Timeline |
| General Motors |
| KGHM Polska Miedz |
GM and KGHM Polska Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and KGHM Polska
The main advantage of trading using opposite GM and KGHM Polska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| KGHM Polska vs. Datawalk SA | KGHM Polska vs. Noble Financials SA | KGHM Polska vs. Quantum Software SA | KGHM Polska vs. Immobile |
Check out your portfolio center.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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