Correlation Between Politeknik Metal and Cimentas Izmir

Can any of the company-specific risk be diversified away by investing in both Politeknik Metal and Cimentas Izmir 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 Politeknik Metal and Cimentas Izmir into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Politeknik Metal Sanayi and Cimentas Izmir Cimento, you can compare the effects of market volatilities on Politeknik Metal and Cimentas Izmir 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 Politeknik Metal with a short position of Cimentas Izmir. Check out your portfolio center. Please also check ongoing floating volatility patterns of Politeknik Metal and Cimentas Izmir.

Diversification Opportunities for Politeknik Metal and Cimentas Izmir

0.64

Correlation Coefficient

Politeknik Metal  Cimentas Izmir

Poor diversification

The 3 months correlation between Politeknik and Cimentas is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Politeknik Metal Sanayi and Cimentas Izmir Cimento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cimentas Izmir Cimento and Politeknik Metal 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 Politeknik Metal Sanayi are associated (or correlated) with Cimentas Izmir. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cimentas Izmir Cimento has no effect on the direction of Politeknik Metal i.e., Politeknik Metal and Cimentas Izmir go up and down completely randomly.

Pair Corralation between Politeknik Metal and Cimentas Izmir

Assuming the 90 days trading horizon Politeknik Metal Sanayi is expected to generate 1.01 times more return on investment than Cimentas Izmir. However, Politeknik Metal is 1.01 times more volatile than Cimentas Izmir Cimento. It trades about -0.04 of its potential returns per unit of risk. Cimentas Izmir Cimento is currently generating about -0.12 per unit of risk. If you would invest  677,250  in Politeknik Metal Sanayi on December 25, 2024 and sell it today you would lose (61,750) from holding Politeknik Metal Sanayi or give up 9.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Politeknik Metal Sanayi  vs.  Cimentas Izmir Cimento

Politeknik Metal Sanayi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Politeknik Metal Sanayi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Cimentas Izmir Cimento

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cimentas Izmir Cimento has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Politeknik Metal and Cimentas Izmir

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

The idea behind Politeknik Metal Sanayi and Cimentas Izmir Cimento 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.