Correlation Between IZDEMIR Enerji and Cimentas Izmir

Can any of the company-specific risk be diversified away by investing in both IZDEMIR Enerji and Cimentas Izmir 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 Cimentas Izmir 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 Cimentas Izmir Cimento, you can compare the effects of market volatilities on IZDEMIR Enerji and Cimentas Izmir 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 Cimentas Izmir. Check out your portfolio center. Please also check ongoing floating volatility patterns of IZDEMIR Enerji and Cimentas Izmir.

Diversification Opportunities for IZDEMIR Enerji and Cimentas Izmir

0.5

Correlation Coefficient

IZDEMIR Enerji  Cimentas Izmir

Very weak diversification

The 3 months correlation between IZDEMIR and Cimentas is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding IZDEMIR Enerji Elektrik and Cimentas Izmir Cimento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cimentas Izmir Cimento 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 Cimentas Izmir. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cimentas Izmir Cimento has no effect on the direction of IZDEMIR Enerji i.e., IZDEMIR Enerji and Cimentas Izmir go up and down completely randomly.

Pair Corralation between IZDEMIR Enerji and Cimentas Izmir

Assuming the 90 days trading horizon IZDEMIR Enerji Elektrik is expected to under-perform the Cimentas Izmir. But the stock apears to be less risky and, when comparing its historical volatility, IZDEMIR Enerji Elektrik is 1.65 times less risky than Cimentas Izmir. The stock trades about -0.03 of its potential returns per unit of risk. The Cimentas Izmir Cimento is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  20,204  in Cimentas Izmir Cimento on October 5, 2024 and sell it today you would earn a total of  24,796  from holding Cimentas Izmir Cimento or generate 122.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.63%
Values	Daily Returns

IZDEMIR Enerji Elektrik  vs.  Cimentas Izmir Cimento

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.

Cimentas Izmir Cimento

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cimentas Izmir Cimento are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Cimentas Izmir demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IZDEMIR Enerji and Cimentas Izmir

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

The idea behind IZDEMIR Enerji Elektrik and Cimentas Izmir Cimento 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.