Correlation Between Kardemir Karabuk and Eregli Demir

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

Diversification Opportunities for Kardemir Karabuk and Eregli Demir

0.6

Correlation Coefficient

Kardemir Karabuk  Eregli Demir

Poor diversification

The 3 months correlation between Kardemir and Eregli is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Kardemir Karabuk Demir and Eregli Demir ve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eregli Demir ve 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 Eregli Demir. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eregli Demir ve has no effect on the direction of Kardemir Karabuk i.e., Kardemir Karabuk and Eregli Demir go up and down completely randomly.

Pair Corralation between Kardemir Karabuk and Eregli Demir

Assuming the 90 days trading horizon Kardemir Karabuk is expected to generate 1.19 times less return on investment than Eregli Demir. But when comparing it to its historical volatility, Kardemir Karabuk Demir is 1.65 times less risky than Eregli Demir. It trades about 0.04 of its potential returns per unit of risk. Eregli Demir ve is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,113  in Eregli Demir ve on September 23, 2024 and sell it today you would earn a total of  397.00  from holding Eregli Demir ve or generate 18.79% 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.  Eregli Demir ve

Kardemir Karabuk Demir

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kardemir Karabuk Demir are ranked lower than 15 (%) 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.

Eregli Demir ve

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eregli Demir ve are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Eregli Demir 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 Eregli Demir

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

The idea behind Kardemir Karabuk Demir and Eregli Demir ve 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.