Correlation Between Arcelik AS and Koc Holding

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

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

Diversification Opportunities for Arcelik AS and Koc Holding

0.72

Correlation Coefficient

Arcelik AS  Koc Holding

Poor diversification

The 3 months correlation between Arcelik and Koc is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Arcelik AS and Koc Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koc Holding AS and Arcelik AS 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 Arcelik AS are associated (or correlated) with Koc Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koc Holding AS has no effect on the direction of Arcelik AS i.e., Arcelik AS and Koc Holding go up and down completely randomly.

Pair Corralation between Arcelik AS and Koc Holding

Assuming the 90 days trading horizon Arcelik AS is expected to generate 1.25 times less return on investment than Koc Holding. But when comparing it to its historical volatility, Arcelik AS is 1.02 times less risky than Koc Holding. It trades about 0.38 of its potential returns per unit of risk. Koc Holding AS is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  16,210  in Koc Holding AS on September 4, 2024 and sell it today you would earn a total of  3,240  from holding Koc Holding AS or generate 19.99% return on investment over 90 days.

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

Arcelik AS  vs.  Koc Holding AS

Arcelik AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcelik AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Arcelik AS is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Koc Holding AS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Koc Holding AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Koc Holding is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Arcelik AS and Koc Holding

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

The idea behind Arcelik AS and Koc Holding AS 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.