Correlation Between Turkiye Garanti and Tofas Turk

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

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

Diversification Opportunities for Turkiye Garanti and Tofas Turk

0.59

Correlation Coefficient

Turkiye Garanti  Tofas Turk

Very weak diversification

The 3 months correlation between Turkiye and Tofas is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Turkiye Garanti Bankasi 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 Turkiye Garanti 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 Turkiye Garanti Bankasi 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 Turkiye Garanti i.e., Turkiye Garanti and Tofas Turk go up and down completely randomly.

Pair Corralation between Turkiye Garanti and Tofas Turk

Assuming the 90 days trading horizon Turkiye Garanti Bankasi is expected to generate 1.0 times more return on investment than Tofas Turk. However, Turkiye Garanti is 1.0 times more volatile than Tofas Turk Otomobil. It trades about 0.27 of its potential returns per unit of risk. Tofas Turk Otomobil is currently generating about 0.13 per unit of risk. If you would invest  10,180  in Turkiye Garanti Bankasi on October 7, 2024 and sell it today you would earn a total of  2,730  from holding Turkiye Garanti Bankasi or generate 26.82% return on investment over 90 days.

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

Turkiye Garanti Bankasi  vs.  Tofas Turk Otomobil

Turkiye Garanti Bankasi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Turkiye Garanti Bankasi are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Turkiye Garanti 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 Turkiye Garanti and Tofas Turk

The main advantage of trading using opposite Turkiye Garanti and Tofas Turk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Turkiye Garanti 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 Turkiye Garanti Bankasi 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.