Correlation Between Kardemir Karabuk and Turkish Airlines

Can any of the company-specific risk be diversified away by investing in both Kardemir Karabuk 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 Kardemir Karabuk and Turkish Airlines 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 Turkish Airlines, you can compare the effects of market volatilities on Kardemir Karabuk 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 Kardemir Karabuk with a short position of Turkish Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kardemir Karabuk and Turkish Airlines.

Diversification Opportunities for Kardemir Karabuk and Turkish Airlines

0.79

Correlation Coefficient

Kardemir Karabuk  Turkish Airlines

Poor diversification

The 3 months correlation between Kardemir and Turkish is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Kardemir Karabuk Demir and Turkish Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Turkish Airlines 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 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 Kardemir Karabuk i.e., Kardemir Karabuk and Turkish Airlines go up and down completely randomly.

Pair Corralation between Kardemir Karabuk and Turkish Airlines

Assuming the 90 days trading horizon Kardemir Karabuk Demir is expected to generate 1.63 times more return on investment than Turkish Airlines. However, Kardemir Karabuk is 1.63 times more volatile than Turkish Airlines. It trades about 0.26 of its potential returns per unit of risk. Turkish Airlines is currently generating about 0.1 per unit of risk. If you would invest  1,897  in Kardemir Karabuk Demir on October 6, 2024 and sell it today you would earn a total of  1,045  from holding Kardemir Karabuk Demir or generate 55.09% return on investment over 90 days.

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

Kardemir Karabuk Demir  vs.  Turkish Airlines

Kardemir Karabuk Demir

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kardemir Karabuk Demir are ranked lower than 20 (%) 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.

Turkish Airlines

Risk-Adjusted Performance

7 of 100

OK

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 Kardemir Karabuk and Turkish Airlines

The main advantage of trading using opposite Kardemir Karabuk and Turkish Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kardemir Karabuk 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 Kardemir Karabuk Demir 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.