Correlation Between Kardemir Karabuk and Politeknik Metal

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

Diversification Opportunities for Kardemir Karabuk and Politeknik Metal

0.69

Correlation Coefficient

Kardemir Karabuk  Politeknik Metal

Poor diversification

The 3 months correlation between Kardemir and Politeknik is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kardemir Karabuk Demir and Politeknik Metal Sanayi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Politeknik Metal Sanayi 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 Politeknik Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Politeknik Metal Sanayi has no effect on the direction of Kardemir Karabuk i.e., Kardemir Karabuk and Politeknik Metal go up and down completely randomly.

Pair Corralation between Kardemir Karabuk and Politeknik Metal

Assuming the 90 days trading horizon Kardemir Karabuk is expected to generate 3.65 times less return on investment than Politeknik Metal. But when comparing it to its historical volatility, Kardemir Karabuk Demir is 1.47 times less risky than Politeknik Metal. It trades about 0.04 of its potential returns per unit of risk. Politeknik Metal Sanayi is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  145,880  in Politeknik Metal Sanayi on October 13, 2024 and sell it today you would earn a total of  531,620  from holding Politeknik Metal Sanayi or generate 364.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Kardemir Karabuk Demir  vs.  Politeknik Metal Sanayi

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.

Politeknik Metal Sanayi

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Politeknik Metal Sanayi are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Politeknik Metal demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kardemir Karabuk and Politeknik Metal

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

The idea behind Kardemir Karabuk Demir and Politeknik Metal Sanayi 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.