Correlation Between Kardemir Karabuk and Ford Otomotiv

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

Diversification Opportunities for Kardemir Karabuk and Ford Otomotiv

0.11

Correlation Coefficient

Kardemir Karabuk  Ford Otomotiv

Average diversification

The 3 months correlation between Kardemir and Ford is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Kardemir Karabuk Demir and Ford Otomotiv Sanayi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Otomotiv 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 Ford Otomotiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Otomotiv Sanayi has no effect on the direction of Kardemir Karabuk i.e., Kardemir Karabuk and Ford Otomotiv go up and down completely randomly.

Pair Corralation between Kardemir Karabuk and Ford Otomotiv

Assuming the 90 days trading horizon Kardemir Karabuk is expected to generate 1.26 times less return on investment than Ford Otomotiv. In addition to that, Kardemir Karabuk is 1.3 times more volatile than Ford Otomotiv Sanayi. It trades about 0.05 of its total potential returns per unit of risk. Ford Otomotiv Sanayi is currently generating about 0.07 per unit of volatility. If you would invest  43,662  in Ford Otomotiv Sanayi on September 26, 2024 and sell it today you would earn a total of  49,588  from holding Ford Otomotiv Sanayi or generate 113.57% return on investment over 90 days.

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

Kardemir Karabuk Demir  vs.  Ford Otomotiv Sanayi

Kardemir Karabuk Demir

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kardemir Karabuk Demir are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Kardemir Karabuk may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ford Otomotiv Sanayi

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Kardemir Karabuk Demir and Ford Otomotiv 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.