Correlation Between Alarko Holding and Tofas Turk

Can any of the company-specific risk be diversified away by investing in both Alarko Holding and Tofas Turk 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 Alarko Holding and Tofas Turk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alarko Holding AS and Tofas Turk Otomobil, you can compare the effects of market volatilities on Alarko Holding and Tofas Turk 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 Alarko Holding with a short position of Tofas Turk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alarko Holding and Tofas Turk.

Diversification Opportunities for Alarko Holding and Tofas Turk

0.61

Correlation Coefficient

Alarko Holding  Tofas Turk

Poor diversification

The 3 months correlation between Alarko and Tofas is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alarko Holding AS and Tofas Turk Otomobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tofas Turk Otomobil and Alarko Holding 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 Alarko Holding AS are associated (or correlated) with Tofas Turk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tofas Turk Otomobil has no effect on the direction of Alarko Holding i.e., Alarko Holding and Tofas Turk go up and down completely randomly.

Pair Corralation between Alarko Holding and Tofas Turk

Assuming the 90 days trading horizon Alarko Holding AS is expected to generate 0.83 times more return on investment than Tofas Turk. However, Alarko Holding AS is 1.21 times less risky than Tofas Turk. It trades about 0.1 of its potential returns per unit of risk. Tofas Turk Otomobil is currently generating about 0.05 per unit of risk. If you would invest  8,620  in Alarko Holding AS on October 7, 2024 and sell it today you would earn a total of  1,075  from holding Alarko Holding AS or generate 12.47% return on investment over 90 days.

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

Alarko Holding AS  vs.  Tofas Turk Otomobil

Alarko Holding AS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alarko Holding AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Alarko Holding demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tofas Turk Otomobil

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tofas Turk Otomobil are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Tofas Turk may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alarko Holding and Tofas Turk

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

The idea behind Alarko Holding AS and Tofas Turk Otomobil 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..