Correlation Between Chocoladefabriken and KGHM Polska

Can any of the company-specific risk be diversified away by investing in both Chocoladefabriken and KGHM Polska 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 Chocoladefabriken and KGHM Polska into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chocoladefabriken Lindt Sprngli and KGHM Polska Miedz, you can compare the effects of market volatilities on Chocoladefabriken and KGHM Polska 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 Chocoladefabriken with a short position of KGHM Polska. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chocoladefabriken and KGHM Polska.

Diversification Opportunities for Chocoladefabriken and KGHM Polska

0.67

Correlation Coefficient

Chocoladefabriken  KGHM Polska

Poor diversification

The 3 months correlation between Chocoladefabriken and KGHM is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chocoladefabriken Lindt Sprngl and KGHM Polska Miedz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KGHM Polska Miedz and Chocoladefabriken 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 Chocoladefabriken Lindt Sprngli are associated (or correlated) with KGHM Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KGHM Polska Miedz has no effect on the direction of Chocoladefabriken i.e., Chocoladefabriken and KGHM Polska go up and down completely randomly.

Pair Corralation between Chocoladefabriken and KGHM Polska

Assuming the 90 days trading horizon Chocoladefabriken is expected to generate 12.0 times less return on investment than KGHM Polska. But when comparing it to its historical volatility, Chocoladefabriken Lindt Sprngli is 9.8 times less risky than KGHM Polska. It trades about 0.13 of its potential returns per unit of risk. KGHM Polska Miedz is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,600  in KGHM Polska Miedz on March 12, 2024 and sell it today you would earn a total of  744.00  from holding KGHM Polska Miedz or generate 28.62% return on investment over 90 days.

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

Chocoladefabriken Lindt Sprngl  vs.  KGHM Polska Miedz

Chocoladefabriken Lindt

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chocoladefabriken Lindt Sprngli are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Chocoladefabriken is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

KGHM Polska Miedz

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KGHM Polska Miedz are ranked lower than 12 (%) 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.

Pair Trading with Chocoladefabriken and KGHM Polska

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

The idea behind Chocoladefabriken Lindt Sprngli and KGHM Polska Miedz 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..