Correlation Between ICBC Turkey and Kardemir Karabuk

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

By analyzing existing cross correlation between ICBC Turkey Bank and Kardemir Karabuk Demir, you can compare the effects of market volatilities on ICBC Turkey and Kardemir Karabuk 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 ICBC Turkey with a short position of Kardemir Karabuk. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICBC Turkey and Kardemir Karabuk.

Diversification Opportunities for ICBC Turkey and Kardemir Karabuk

0.81

Correlation Coefficient

ICBC Turkey  Kardemir Karabuk

Very poor diversification

The 3 months correlation between ICBC and Kardemir is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ICBC Turkey Bank and Kardemir Karabuk Demir in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kardemir Karabuk Demir and ICBC Turkey 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 ICBC Turkey Bank are associated (or correlated) with Kardemir Karabuk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kardemir Karabuk Demir has no effect on the direction of ICBC Turkey i.e., ICBC Turkey and Kardemir Karabuk go up and down completely randomly.

Pair Corralation between ICBC Turkey and Kardemir Karabuk

Assuming the 90 days trading horizon ICBC Turkey is expected to generate 1.2 times less return on investment than Kardemir Karabuk. But when comparing it to its historical volatility, ICBC Turkey Bank is 1.06 times less risky than Kardemir Karabuk. It trades about 0.05 of its potential returns per unit of risk. Kardemir Karabuk Demir is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,491  in Kardemir Karabuk Demir on October 24, 2024 and sell it today you would earn a total of  1,349  from holding Kardemir Karabuk Demir or generate 90.48% return on investment over 90 days.

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

ICBC Turkey Bank  vs.  Kardemir Karabuk Demir

ICBC Turkey Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ICBC Turkey Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, ICBC Turkey may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kardemir Karabuk Demir

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kardemir Karabuk Demir are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Kardemir Karabuk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ICBC Turkey and Kardemir Karabuk

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

The idea behind ICBC Turkey Bank and Kardemir Karabuk Demir 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.