Correlation Between KGHM Polska and UniCredit SpA
Can any of the company-specific risk be diversified away by investing in both KGHM Polska and UniCredit SpA 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 UniCredit SpA 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 UniCredit SpA, you can compare the effects of market volatilities on KGHM Polska and UniCredit SpA 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 UniCredit SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KGHM Polska and UniCredit SpA.
Diversification Opportunities for KGHM Polska and UniCredit SpA
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between KGHM and UniCredit is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and UniCredit SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA 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 UniCredit SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UniCredit SpA has no effect on the direction of KGHM Polska i.e., KGHM Polska and UniCredit SpA go up and down completely randomly.
Pair Corralation between KGHM Polska and UniCredit SpA
Assuming the 90 days trading horizon KGHM Polska is expected to generate 1.76 times less return on investment than UniCredit SpA. But when comparing it to its historical volatility, KGHM Polska Miedz is 1.26 times less risky than UniCredit SpA. It trades about 0.41 of its potential returns per unit of risk. UniCredit SpA is currently generating about 0.58 of returns per unit of risk over similar time horizon. If you would invest 16,100 in UniCredit SpA on October 23, 2024 and sell it today you would earn a total of 2,366 from holding UniCredit SpA or generate 14.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KGHM Polska Miedz vs. UniCredit SpA
Performance |
| Timeline |
| KGHM Polska Miedz |
| UniCredit SpA |
KGHM Polska and UniCredit SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KGHM Polska and UniCredit SpA
The main advantage of trading using opposite KGHM Polska and UniCredit SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska position performs unexpectedly, UniCredit SpA 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 UniCredit SpA will offset losses from the drop in UniCredit SpA's long position.| KGHM Polska vs. LSI Software SA | KGHM Polska vs. SOFTWARE MANSION SPOLKA | KGHM Polska vs. Noble Financials SA | KGHM Polska vs. Cloud Technologies SA |
| UniCredit SpA vs. All In Games | UniCredit SpA vs. UF Games SA | UniCredit SpA vs. LSI Software SA | UniCredit SpA vs. Inter Cars 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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