Correlation Between Federal Mogul and Turk Tuborg

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

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

Diversification Opportunities for Federal Mogul and Turk Tuborg

0.5

Correlation Coefficient

Federal Mogul  Turk Tuborg

Very weak diversification

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

Pair Corralation between Federal Mogul and Turk Tuborg

Assuming the 90 days trading horizon Federal Mogul is expected to generate 1.92 times less return on investment than Turk Tuborg. But when comparing it to its historical volatility, Federal Mogul Izmit is 1.93 times less risky than Turk Tuborg. It trades about 0.18 of its potential returns per unit of risk. Turk Tuborg Bira is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  12,850  in Turk Tuborg Bira on September 23, 2024 and sell it today you would earn a total of  1,550  from holding Turk Tuborg Bira or generate 12.06% return on investment over 90 days.

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

Federal Mogul Izmit  vs.  Turk Tuborg Bira

Federal Mogul Izmit

Risk-Adjusted Performance

0 of 100

Very Weak

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

Turk Tuborg Bira

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Federal Mogul and Turk Tuborg

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

The idea behind Federal Mogul Izmit and Turk Tuborg Bira 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.