Correlation Between Izmir Demir and Turkish Airlines

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

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

Diversification Opportunities for Izmir Demir and Turkish Airlines

0.59

Correlation Coefficient

Izmir Demir  Turkish Airlines

Very weak diversification

The 3 months correlation between Izmir and Turkish is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Izmir Demir Celik and Turkish Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Turkish Airlines and Izmir Demir 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 Izmir Demir Celik are associated (or correlated) with Turkish Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Turkish Airlines has no effect on the direction of Izmir Demir i.e., Izmir Demir and Turkish Airlines go up and down completely randomly.

Pair Corralation between Izmir Demir and Turkish Airlines

Assuming the 90 days trading horizon Izmir Demir Celik is expected to generate 1.92 times more return on investment than Turkish Airlines. However, Izmir Demir is 1.92 times more volatile than Turkish Airlines. It trades about 0.08 of its potential returns per unit of risk. Turkish Airlines is currently generating about 0.06 per unit of risk. If you would invest  533.00  in Izmir Demir Celik on October 6, 2024 and sell it today you would earn a total of  22.00  from holding Izmir Demir Celik or generate 4.13% return on investment over 90 days.

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

Izmir Demir Celik  vs.  Turkish Airlines

Izmir Demir Celik

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Izmir Demir Celik are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Izmir Demir is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Turkish Airlines

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Turkish Airlines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Turkish Airlines may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Izmir Demir and Turkish Airlines

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

The idea behind Izmir Demir Celik and Turkish Airlines 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.