Correlation Between GM and Mercan Kimya

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

By analyzing existing cross correlation between General Motors and Mercan Kimya Sanayi, you can compare the effects of market volatilities on GM and Mercan Kimya 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 GM with a short position of Mercan Kimya. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mercan Kimya.

Diversification Opportunities for GM and Mercan Kimya

0.17

Correlation Coefficient

GM  Mercan Kimya

Average diversification

The 3 months correlation between GM and Mercan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mercan Kimya Sanayi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercan Kimya Sanayi and GM 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 General Motors are associated (or correlated) with Mercan Kimya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercan Kimya Sanayi has no effect on the direction of GM i.e., GM and Mercan Kimya go up and down completely randomly.

Pair Corralation between GM and Mercan Kimya

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Mercan Kimya. In addition to that, GM is 1.47 times more volatile than Mercan Kimya Sanayi. It trades about -0.23 of its total potential returns per unit of risk. Mercan Kimya Sanayi is currently generating about -0.28 per unit of volatility. If you would invest  1,341  in Mercan Kimya Sanayi on September 23, 2024 and sell it today you would lose (131.00) from holding Mercan Kimya Sanayi or give up 9.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Mercan Kimya Sanayi

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mercan Kimya Sanayi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GM and Mercan Kimya

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

The idea behind General Motors and Mercan Kimya Sanayi 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.