Correlation Between KGHM Polska and CENTRICA ADR

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

Diversification Opportunities for KGHM Polska and CENTRICA ADR

-0.04
  Correlation Coefficient

Good diversification

The 3 months correlation between KGHM and CENTRICA is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and CENTRICA ADR NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTRICA ADR 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 CENTRICA ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTRICA ADR NEW has no effect on the direction of KGHM Polska i.e., KGHM Polska and CENTRICA ADR go up and down completely randomly.

Pair Corralation between KGHM Polska and CENTRICA ADR

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to generate 1.28 times more return on investment than CENTRICA ADR. However, KGHM Polska is 1.28 times more volatile than CENTRICA ADR NEW. It trades about 0.06 of its potential returns per unit of risk. CENTRICA ADR NEW is currently generating about 0.01 per unit of risk. If you would invest  2,830  in KGHM Polska Miedz on April 23, 2025 and sell it today you would earn a total of  227.00  from holding KGHM Polska Miedz or generate 8.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

KGHM Polska Miedz  vs.  CENTRICA ADR NEW

 Performance 
       Timeline  
KGHM Polska Miedz 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in KGHM Polska Miedz are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, KGHM Polska may actually be approaching a critical reversion point that can send shares even higher in August 2025.
CENTRICA ADR NEW 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in CENTRICA ADR NEW are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CENTRICA ADR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KGHM Polska and CENTRICA ADR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KGHM Polska and CENTRICA ADR

The main advantage of trading using opposite KGHM Polska and CENTRICA ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KGHM Polska position performs unexpectedly, CENTRICA ADR 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 CENTRICA ADR will offset losses from the drop in CENTRICA ADR's long position.
The idea behind KGHM Polska Miedz and CENTRICA ADR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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