Correlation Between KGHM Polska and NexGen Energy

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

Diversification Opportunities for KGHM Polska and NexGen Energy

0.58

Correlation Coefficient

KGHM Polska  NexGen Energy

Very weak diversification

The 3 months correlation between KGHM and NexGen is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy 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 NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of KGHM Polska i.e., KGHM Polska and NexGen Energy go up and down completely randomly.

Pair Corralation between KGHM Polska and NexGen Energy

Assuming the 90 days trading horizon KGHM Polska is expected to generate 4.15 times less return on investment than NexGen Energy. But when comparing it to its historical volatility, KGHM Polska Miedz is 1.9 times less risky than NexGen Energy. It trades about 0.06 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  426.00  in NexGen Energy on April 24, 2025 and sell it today you would earn a total of  148.00  from holding NexGen Energy or generate 34.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

KGHM Polska Miedz  vs.  NexGen Energy

KGHM Polska Miedz

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KGHM Polska Miedz are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, KGHM Polska may actually be approaching a critical reversion point that can send shares even higher in August 2025.

NexGen Energy

Risk-Adjusted Performance

OK

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

Pair Trading with KGHM Polska and NexGen Energy

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

The idea behind KGHM Polska Miedz and NexGen Energy 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.