Correlation Between Kardemir Karabuk and MEGA METAL

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

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

Diversification Opportunities for Kardemir Karabuk and MEGA METAL

0.47

Correlation Coefficient

Kardemir Karabuk  MEGA METAL

Very weak diversification

The 3 months correlation between Kardemir and MEGA is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Kardemir Karabuk Demir and MEGA METAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEGA METAL and Kardemir Karabuk 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 Kardemir Karabuk Demir are associated (or correlated) with MEGA METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEGA METAL has no effect on the direction of Kardemir Karabuk i.e., Kardemir Karabuk and MEGA METAL go up and down completely randomly.

Pair Corralation between Kardemir Karabuk and MEGA METAL

Assuming the 90 days trading horizon Kardemir Karabuk Demir is expected to generate 0.77 times more return on investment than MEGA METAL. However, Kardemir Karabuk Demir is 1.31 times less risky than MEGA METAL. It trades about 0.06 of its potential returns per unit of risk. MEGA METAL is currently generating about 0.02 per unit of risk. 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	Weak
Accuracy	55.56%
Values	Daily Returns

Kardemir Karabuk Demir  vs.  MEGA METAL

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.

MEGA METAL

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kardemir Karabuk and MEGA METAL

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

The idea behind Kardemir Karabuk Demir and MEGA METAL 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.