Correlation Between KGHM Polska and Ferro SA
Can any of the company-specific risk be diversified away by investing in both KGHM Polska and Ferro 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 Ferro 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 Ferro SA, you can compare the effects of market volatilities on KGHM Polska and Ferro 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 Ferro SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KGHM Polska and Ferro SA.
Diversification Opportunities for KGHM Polska and Ferro SA
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KGHM and Ferro is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Ferro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferro 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 Ferro SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferro SA has no effect on the direction of KGHM Polska i.e., KGHM Polska and Ferro SA go up and down completely randomly.
Pair Corralation between KGHM Polska and Ferro SA
Assuming the 90 days trading horizon KGHM Polska Miedz is expected to under-perform the Ferro SA. In addition to that, KGHM Polska is 1.35 times more volatile than Ferro SA. It trades about -0.28 of its total potential returns per unit of risk. Ferro SA is currently generating about 0.03 per unit of volatility. If you would invest 3,390 in Ferro SA on September 3, 2024 and sell it today you would earn a total of 30.00 from holding Ferro SA or generate 0.88% 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. Ferro SA
Performance |
| Timeline |
| KGHM Polska Miedz |
| Ferro SA |
KGHM Polska and Ferro SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KGHM Polska and Ferro SA
The main advantage of trading using opposite KGHM Polska and Ferro SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska position performs unexpectedly, Ferro 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 Ferro SA will offset losses from the drop in Ferro SA's long position.| KGHM Polska vs. PMPG Polskie Media | KGHM Polska vs. SOFTWARE MANSION SPOLKA | KGHM Polska vs. LSI Software SA | KGHM Polska vs. Globe Trade Centre |
| Ferro SA vs. Monnari Trade SA | Ferro SA vs. CI Games SA | Ferro SA vs. Immobile | Ferro SA vs. Globe Trade Centre |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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