Correlation Between Eregli Demir and Brisa Bridgestone

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

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

Diversification Opportunities for Eregli Demir and Brisa Bridgestone

0.77

Correlation Coefficient

Eregli Demir  Brisa Bridgestone

Poor diversification

The 3 months correlation between Eregli and Brisa is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Eregli Demir ve and Brisa Bridgestone Sabanci in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brisa Bridgestone Sabanci and Eregli Demir 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 Eregli Demir ve are associated (or correlated) with Brisa Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brisa Bridgestone Sabanci has no effect on the direction of Eregli Demir i.e., Eregli Demir and Brisa Bridgestone go up and down completely randomly.

Pair Corralation between Eregli Demir and Brisa Bridgestone

Assuming the 90 days trading horizon Eregli Demir ve is expected to under-perform the Brisa Bridgestone. In addition to that, Eregli Demir is 1.3 times more volatile than Brisa Bridgestone Sabanci. It trades about -0.04 of its total potential returns per unit of risk. Brisa Bridgestone Sabanci is currently generating about -0.02 per unit of volatility. If you would invest  9,120  in Brisa Bridgestone Sabanci on December 28, 2024 and sell it today you would lose (345.00) from holding Brisa Bridgestone Sabanci or give up 3.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Eregli Demir ve  vs.  Brisa Bridgestone Sabanci

Eregli Demir ve

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eregli Demir ve has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Brisa Bridgestone Sabanci

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Eregli Demir and Brisa Bridgestone

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

The idea behind Eregli Demir ve and Brisa Bridgestone Sabanci 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 Global Correlations module to find global opportunities by holding instruments from different markets.