Correlation Between AG Anadolu and Federal Mogul

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

By analyzing existing cross correlation between AG Anadolu Group and Federal Mogul Izmit, you can compare the effects of market volatilities on AG Anadolu and Federal Mogul 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 AG Anadolu with a short position of Federal Mogul. Check out your portfolio center. Please also check ongoing floating volatility patterns of AG Anadolu and Federal Mogul.

Diversification Opportunities for AG Anadolu and Federal Mogul

0.5

Correlation Coefficient

AG Anadolu  Federal Mogul

Very weak diversification

The 3 months correlation between AGHOL and Federal is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding AG Anadolu Group and Federal Mogul Izmit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Mogul Izmit and AG Anadolu 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 AG Anadolu Group are associated (or correlated) with Federal Mogul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Mogul Izmit has no effect on the direction of AG Anadolu i.e., AG Anadolu and Federal Mogul go up and down completely randomly.

Pair Corralation between AG Anadolu and Federal Mogul

Assuming the 90 days trading horizon AG Anadolu Group is expected to generate 1.86 times more return on investment than Federal Mogul. However, AG Anadolu is 1.86 times more volatile than Federal Mogul Izmit. It trades about 0.14 of its potential returns per unit of risk. Federal Mogul Izmit is currently generating about 0.09 per unit of risk. If you would invest  27,500  in AG Anadolu Group on October 6, 2024 and sell it today you would earn a total of  5,350  from holding AG Anadolu Group or generate 19.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

AG Anadolu Group  vs.  Federal Mogul Izmit

AG Anadolu Group

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days AG Anadolu Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak forward indicators, AG Anadolu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Federal Mogul Izmit

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Mogul Izmit are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Federal Mogul demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AG Anadolu and Federal Mogul

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

The idea behind AG Anadolu Group and Federal Mogul Izmit 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.