Correlation Between KGHM Polska and Erbud SA
Can any of the company-specific risk be diversified away by investing in both KGHM Polska and Erbud SA 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 Erbud SA 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 Erbud SA, you can compare the effects of market volatilities on KGHM Polska and Erbud SA 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 Erbud SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KGHM Polska and Erbud SA.
Diversification Opportunities for KGHM Polska and Erbud SA
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KGHM and Erbud is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Erbud SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erbud SA 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 Erbud SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erbud SA has no effect on the direction of KGHM Polska i.e., KGHM Polska and Erbud SA go up and down completely randomly.
Pair Corralation between KGHM Polska and Erbud SA
Assuming the 90 days trading horizon KGHM Polska Miedz is expected to generate 0.98 times more return on investment than Erbud SA. However, KGHM Polska Miedz is 1.02 times less risky than Erbud SA. It trades about 0.02 of its potential returns per unit of risk. Erbud SA is currently generating about 0.01 per unit of risk. If you would invest 11,833 in KGHM Polska Miedz on September 2, 2024 and sell it today you would earn a total of 892.00 from holding KGHM Polska Miedz or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KGHM Polska Miedz vs. Erbud SA
Performance |
| Timeline |
| KGHM Polska Miedz |
| Erbud SA |
KGHM Polska and Erbud SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KGHM Polska and Erbud SA
The main advantage of trading using opposite KGHM Polska and Erbud SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska position performs unexpectedly, Erbud SA 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 Erbud SA will offset losses from the drop in Erbud SA's long position.| KGHM Polska vs. Asseco Business Solutions | KGHM Polska vs. Detalion Games SA | KGHM Polska vs. Asseco South Eastern | KGHM Polska vs. CFI Holding SA |
| Erbud SA vs. Banco Santander SA | Erbud SA vs. UniCredit SpA | Erbud SA vs. CEZ as | Erbud SA vs. Polski Koncern Naftowy |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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