Correlation Between Gentas Genel and Izmir Demir

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

By analyzing existing cross correlation between Gentas Genel Metal and Izmir Demir Celik, you can compare the effects of market volatilities on Gentas Genel and Izmir 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 Gentas Genel with a short position of Izmir Demir. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gentas Genel and Izmir Demir.

Diversification Opportunities for Gentas Genel and Izmir Demir

0.63

Correlation Coefficient

Gentas Genel  Izmir Demir

Poor diversification

The 3 months correlation between Gentas and Izmir is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Gentas Genel Metal and Izmir Demir Celik in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Izmir Demir Celik and Gentas Genel 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 Gentas Genel Metal are associated (or correlated) with Izmir Demir. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Izmir Demir Celik has no effect on the direction of Gentas Genel i.e., Gentas Genel and Izmir Demir go up and down completely randomly.

Pair Corralation between Gentas Genel and Izmir Demir

Assuming the 90 days trading horizon Gentas Genel Metal is expected to generate 1.6 times more return on investment than Izmir Demir. However, Gentas Genel is 1.6 times more volatile than Izmir Demir Celik. It trades about 0.28 of its potential returns per unit of risk. Izmir Demir Celik is currently generating about -0.22 per unit of risk. If you would invest  937.00  in Gentas Genel Metal on October 8, 2024 and sell it today you would earn a total of  164.00  from holding Gentas Genel Metal or generate 17.5% return on investment over 90 days.

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

Gentas Genel Metal  vs.  Izmir Demir Celik

Gentas Genel Metal

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gentas Genel Metal are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Gentas Genel demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Izmir Demir Celik

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Gentas Genel and Izmir Demir

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

The idea behind Gentas Genel Metal and Izmir Demir Celik 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.