Correlation Between KGHM Polska and Enbridge

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

Diversification Opportunities for KGHM Polska and Enbridge

-0.57

Correlation Coefficient

KGHM Polska  Enbridge

Excellent diversification

The 3 months correlation between KGHM and Enbridge is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge 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 Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of KGHM Polska i.e., KGHM Polska and Enbridge go up and down completely randomly.

Pair Corralation between KGHM Polska and Enbridge

Assuming the 90 days trading horizon KGHM Polska Miedz is expected to generate 2.31 times more return on investment than Enbridge. However, KGHM Polska is 2.31 times more volatile than Enbridge. It trades about 0.16 of its potential returns per unit of risk. Enbridge is currently generating about -0.06 per unit of risk. If you would invest  2,870  in KGHM Polska Miedz on April 22, 2025 and sell it today you would earn a total of  187.00  from holding KGHM Polska Miedz or generate 6.52% return on investment over 90 days.

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

KGHM Polska Miedz  vs.  Enbridge

KGHM Polska Miedz

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KGHM Polska Miedz are ranked lower than 7 (%) 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.

Enbridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enbridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Enbridge 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 Enbridge

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

The idea behind KGHM Polska Miedz and Enbridge 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.