Correlation Between KGHM Polska and Pepco Group
Can any of the company-specific risk be diversified away by investing in both KGHM Polska and Pepco Group 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 Pepco Group 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 Pepco Group BV, you can compare the effects of market volatilities on KGHM Polska and Pepco Group 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 Pepco Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of KGHM Polska and Pepco Group.
Diversification Opportunities for KGHM Polska and Pepco Group
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KGHM and Pepco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Pepco Group BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pepco Group BV 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 Pepco Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pepco Group BV has no effect on the direction of KGHM Polska i.e., KGHM Polska and Pepco Group go up and down completely randomly.
Pair Corralation between KGHM Polska and Pepco Group
Assuming the 90 days trading horizon KGHM Polska Miedz is expected to generate 0.77 times more return on investment than Pepco Group. However, KGHM Polska Miedz is 1.3 times less risky than Pepco Group. It trades about 0.03 of its potential returns per unit of risk. Pepco Group BV is currently generating about -0.06 per unit of risk. If you would invest 10,993 in KGHM Polska Miedz on August 28, 2024 and sell it today you would earn a total of 2,002 from holding KGHM Polska Miedz or generate 18.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KGHM Polska Miedz vs. Pepco Group BV
Performance |
| Timeline |
| KGHM Polska Miedz |
| Pepco Group BV |
KGHM Polska and Pepco Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KGHM Polska and Pepco Group
The main advantage of trading using opposite KGHM Polska and Pepco Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska position performs unexpectedly, Pepco Group 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 Pepco Group will offset losses from the drop in Pepco Group's long position.| KGHM Polska vs. Cloud Technologies SA | KGHM Polska vs. Ultimate Games SA | KGHM Polska vs. Gamedust SA | KGHM Polska vs. UF Games SA |
| Pepco Group vs. Asseco Business Solutions | Pepco Group vs. Detalion Games SA | Pepco Group vs. Asseco South Eastern | Pepco Group vs. Movie Games SA |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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