Correlation Between KGHM Polska and BORR DRILLING

Can any of the company-specific risk be diversified away by investing in both KGHM Polska and BORR DRILLING 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 BORR DRILLING 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 BORR DRILLING NEW, you can compare the effects of market volatilities on KGHM Polska and BORR DRILLING 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 BORR DRILLING. Check out your portfolio center. Please also check ongoing floating volatility patterns of KGHM Polska and BORR DRILLING.

Diversification Opportunities for KGHM Polska and BORR DRILLING

-0.28

Correlation Coefficient

KGHM Polska  BORR DRILLING

Very good diversification

The 3 months correlation between KGHM and BORR is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and BORR DRILLING NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BORR DRILLING NEW 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 BORR DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BORR DRILLING NEW has no effect on the direction of KGHM Polska i.e., KGHM Polska and BORR DRILLING go up and down completely randomly.

Pair Corralation between KGHM Polska and BORR DRILLING

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to generate 0.93 times more return on investment than BORR DRILLING. However, KGHM Polska Miedz is 1.08 times less risky than BORR DRILLING. It trades about 0.13 of its potential returns per unit of risk. BORR DRILLING NEW is currently generating about 0.01 per unit of risk. If you would invest  2,724  in KGHM Polska Miedz on March 14, 2024 and sell it today you would earn a total of  612.00  from holding KGHM Polska Miedz or generate 22.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

KGHM Polska Miedz  vs.  BORR DRILLING NEW

KGHM Polska Miedz

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KGHM Polska Miedz are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, KGHM Polska reported solid returns over the last few months and may actually be approaching a breakup point.

BORR DRILLING NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BORR DRILLING NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BORR DRILLING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KGHM Polska and BORR DRILLING

The main advantage of trading using opposite KGHM Polska and BORR DRILLING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska position performs unexpectedly, BORR DRILLING 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 BORR DRILLING will offset losses from the drop in BORR DRILLING's long position.

The idea behind KGHM Polska Miedz and BORR DRILLING NEW pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.