Correlation Between Bursa Cimento and Eregli Demir

Can any of the company-specific risk be diversified away by investing in both Bursa Cimento and Eregli Demir 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 Bursa Cimento and Eregli Demir into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bursa Cimento Fabrikasi and Eregli Demir ve, you can compare the effects of market volatilities on Bursa Cimento and Eregli Demir 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 Bursa Cimento with a short position of Eregli Demir. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bursa Cimento and Eregli Demir.

Diversification Opportunities for Bursa Cimento and Eregli Demir

0.8

Correlation Coefficient

Bursa Cimento  Eregli Demir

Very poor diversification

The 3 months correlation between Bursa and Eregli is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bursa Cimento Fabrikasi and Eregli Demir ve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eregli Demir ve and Bursa Cimento 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 Bursa Cimento Fabrikasi are associated (or correlated) with Eregli Demir. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eregli Demir ve has no effect on the direction of Bursa Cimento i.e., Bursa Cimento and Eregli Demir go up and down completely randomly.

Pair Corralation between Bursa Cimento and Eregli Demir

Assuming the 90 days trading horizon Bursa Cimento Fabrikasi is expected to generate 1.77 times more return on investment than Eregli Demir. However, Bursa Cimento is 1.77 times more volatile than Eregli Demir ve. It trades about 0.16 of its potential returns per unit of risk. Eregli Demir ve is currently generating about -0.02 per unit of risk. If you would invest  742.00  in Bursa Cimento Fabrikasi on September 24, 2024 and sell it today you would earn a total of  70.00  from holding Bursa Cimento Fabrikasi or generate 9.43% return on investment over 90 days.

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

Bursa Cimento Fabrikasi  vs.  Eregli Demir ve

Bursa Cimento Fabrikasi

Risk-Adjusted Performance

4 of 100

Insignificant

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

Eregli Demir ve

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Bursa Cimento and Eregli Demir

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

The idea behind Bursa Cimento Fabrikasi and Eregli Demir ve 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.