Correlation Between Kardemir Karabuk and Gubre Fabrikalari

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

Diversification Opportunities for Kardemir Karabuk and Gubre Fabrikalari

0.82

Correlation Coefficient

Kardemir Karabuk  Gubre Fabrikalari

Very poor diversification

The 3 months correlation between Kardemir and Gubre is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Kardemir Karabuk Demir and Gubre Fabrikalari TAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gubre Fabrikalari TAS 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 Gubre Fabrikalari. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gubre Fabrikalari TAS has no effect on the direction of Kardemir Karabuk i.e., Kardemir Karabuk and Gubre Fabrikalari go up and down completely randomly.

Pair Corralation between Kardemir Karabuk and Gubre Fabrikalari

Assuming the 90 days trading horizon Kardemir Karabuk is expected to generate 6.69 times less return on investment than Gubre Fabrikalari. In addition to that, Kardemir Karabuk is 1.38 times more volatile than Gubre Fabrikalari TAS. It trades about 0.06 of its total potential returns per unit of risk. Gubre Fabrikalari TAS is currently generating about 0.59 per unit of volatility. If you would invest  22,250  in Gubre Fabrikalari TAS on September 25, 2024 and sell it today you would earn a total of  5,425  from holding Gubre Fabrikalari TAS or generate 24.38% return on investment over 90 days.

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

Kardemir Karabuk Demir  vs.  Gubre Fabrikalari TAS

Kardemir Karabuk Demir

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kardemir Karabuk Demir are ranked lower than 4 (%) 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.

Gubre Fabrikalari TAS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gubre Fabrikalari TAS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Gubre Fabrikalari demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kardemir Karabuk and Gubre Fabrikalari

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

The idea behind Kardemir Karabuk Demir and Gubre Fabrikalari TAS 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.