Correlation Between KGHM Polska and Hensoldt

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

Diversification Opportunities for KGHM Polska and Hensoldt

0.21

Correlation Coefficient

KGHM Polska  Hensoldt

Modest diversification

The 3 months correlation between KGHM and Hensoldt is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Hensoldt Ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hensoldt Ag 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 Hensoldt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hensoldt Ag has no effect on the direction of KGHM Polska i.e., KGHM Polska and Hensoldt go up and down completely randomly.

Pair Corralation between KGHM Polska and Hensoldt

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to generate 0.94 times more return on investment than Hensoldt. However, KGHM Polska Miedz is 1.06 times less risky than Hensoldt. It trades about 0.14 of its potential returns per unit of risk. Hensoldt Ag is currently generating about 0.07 per unit of risk. If you would invest  2,700  in KGHM Polska Miedz on March 13, 2024 and sell it today you would earn a total of  632.00  from holding KGHM Polska Miedz or generate 23.41% 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.  Hensoldt Ag

KGHM Polska Miedz

Risk-Adjusted Performance

10 of 100

Good

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.

Hensoldt Ag

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hensoldt Ag are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hensoldt unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KGHM Polska and Hensoldt

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

The idea behind KGHM Polska Miedz and Hensoldt Ag 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 CEOs Directory module to screen CEOs from public companies around the world.