Correlation Between KGHM Polska and CHINA EAST

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

Diversification Opportunities for KGHM Polska and CHINA EAST

0.6

Correlation Coefficient

KGHM Polska  CHINA EAST

Poor diversification

The 3 months correlation between KGHM and CHINA is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding KGHM Polska Miedz and CHINA EAST ED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EAST ED 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 CHINA EAST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EAST ED has no effect on the direction of KGHM Polska i.e., KGHM Polska and CHINA EAST go up and down completely randomly.

Pair Corralation between KGHM Polska and CHINA EAST

Assuming the 90 days trading horizon KGHM Polska is expected to generate 4.06 times less return on investment than CHINA EAST. But when comparing it to its historical volatility, KGHM Polska Miedz is 3.15 times less risky than CHINA EAST. It trades about 0.06 of its potential returns per unit of risk. CHINA EAST ED is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  63.00  in CHINA EAST ED on April 23, 2025 and sell it today you would earn a total of  16.00  from holding CHINA EAST ED or generate 25.4% return on investment over 90 days.

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

KGHM Polska Miedz  vs.  CHINA EAST ED

KGHM Polska Miedz

Risk-Adjusted Performance

Modest

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 unsteady technical indicators, KGHM Polska may actually be approaching a critical reversion point that can send shares even higher in August 2025.

CHINA EAST ED

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA EAST ED are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA EAST reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KGHM Polska and CHINA EAST

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

The idea behind KGHM Polska Miedz and CHINA EAST ED 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.