Correlation Between KGHM Polska and LSI Software
Can any of the company-specific risk be diversified away by investing in both KGHM Polska and LSI Software 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 LSI Software 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 LSI Software SA, you can compare the effects of market volatilities on KGHM Polska and LSI Software 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 LSI Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of KGHM Polska and LSI Software.
Diversification Opportunities for KGHM Polska and LSI Software
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KGHM and LSI is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and LSI Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LSI Software 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 LSI Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LSI Software SA has no effect on the direction of KGHM Polska i.e., KGHM Polska and LSI Software go up and down completely randomly.
Pair Corralation between KGHM Polska and LSI Software
Assuming the 90 days trading horizon KGHM Polska Miedz is expected to generate 0.48 times more return on investment than LSI Software. However, KGHM Polska Miedz is 2.1 times less risky than LSI Software. It trades about 0.19 of its potential returns per unit of risk. LSI Software SA is currently generating about 0.07 per unit of risk. If you would invest 11,755 in KGHM Polska Miedz on November 3, 2024 and sell it today you would earn a total of 820.00 from holding KGHM Polska Miedz or generate 6.98% 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. LSI Software SA
Performance |
| Timeline |
| KGHM Polska Miedz |
| LSI Software SA |
KGHM Polska and LSI Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KGHM Polska and LSI Software
The main advantage of trading using opposite KGHM Polska and LSI Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska position performs unexpectedly, LSI Software 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 LSI Software will offset losses from the drop in LSI Software's long position.| KGHM Polska vs. Skyline Investment SA | KGHM Polska vs. Igoria Trade SA | KGHM Polska vs. Immobile | KGHM Polska vs. Movie Games SA |
| LSI Software vs. Quantum Software SA | LSI Software vs. Detalion Games SA | LSI Software vs. Movie Games SA | LSI Software vs. Altustfi |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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