Correlation Between IZDEMIR Enerji and Alkim Kagit

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

By analyzing existing cross correlation between IZDEMIR Enerji Elektrik and Alkim Kagit Sanayi, you can compare the effects of market volatilities on IZDEMIR Enerji and Alkim Kagit 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 IZDEMIR Enerji with a short position of Alkim Kagit. Check out your portfolio center. Please also check ongoing floating volatility patterns of IZDEMIR Enerji and Alkim Kagit.

Diversification Opportunities for IZDEMIR Enerji and Alkim Kagit

0.34

Correlation Coefficient

IZDEMIR Enerji  Alkim Kagit

Weak diversification

The 3 months correlation between IZDEMIR and Alkim is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding IZDEMIR Enerji Elektrik and Alkim Kagit Sanayi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkim Kagit Sanayi and IZDEMIR Enerji 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 IZDEMIR Enerji Elektrik are associated (or correlated) with Alkim Kagit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkim Kagit Sanayi has no effect on the direction of IZDEMIR Enerji i.e., IZDEMIR Enerji and Alkim Kagit go up and down completely randomly.

Pair Corralation between IZDEMIR Enerji and Alkim Kagit

Assuming the 90 days trading horizon IZDEMIR Enerji is expected to generate 12.71 times less return on investment than Alkim Kagit. But when comparing it to its historical volatility, IZDEMIR Enerji Elektrik is 2.54 times less risky than Alkim Kagit. It trades about 0.08 of its potential returns per unit of risk. Alkim Kagit Sanayi is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  673.00  in Alkim Kagit Sanayi on October 6, 2024 and sell it today you would earn a total of  287.00  from holding Alkim Kagit Sanayi or generate 42.64% return on investment over 90 days.

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

IZDEMIR Enerji Elektrik  vs.  Alkim Kagit Sanayi

IZDEMIR Enerji Elektrik

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IZDEMIR Enerji Elektrik are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, IZDEMIR Enerji demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Alkim Kagit Sanayi

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alkim Kagit Sanayi are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Alkim Kagit unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IZDEMIR Enerji and Alkim Kagit

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

The idea behind IZDEMIR Enerji Elektrik and Alkim Kagit 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.