Correlation Between Tumosan and Politeknik Metal

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

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

Diversification Opportunities for Tumosan and Politeknik Metal

0.35

Correlation Coefficient

Tumosan  Politeknik Metal

Weak diversification

The 3 months correlation between Tumosan and Politeknik is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tumosan Motor ve 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 Tumosan 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 Tumosan Motor ve 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 Tumosan i.e., Tumosan and Politeknik Metal go up and down completely randomly.

Pair Corralation between Tumosan and Politeknik Metal

Assuming the 90 days trading horizon Tumosan Motor ve is expected to under-perform the Politeknik Metal. But the stock apears to be less risky and, when comparing its historical volatility, Tumosan Motor ve is 1.14 times less risky than Politeknik Metal. The stock trades about -0.02 of its potential returns per unit of risk. The Politeknik Metal Sanayi is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  730,500  in Politeknik Metal Sanayi on September 13, 2024 and sell it today you would lose (30,500) from holding Politeknik Metal Sanayi or give up 4.18% of portfolio value over 90 days.

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

Tumosan Motor ve  vs.  Politeknik Metal Sanayi

Tumosan Motor ve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tumosan Motor ve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Tumosan is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Politeknik Metal Sanayi

Risk-Adjusted Performance

0 of 100

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 fairly strong forward indicators, Politeknik Metal is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Tumosan and Politeknik Metal

The main advantage of trading using opposite Tumosan and Politeknik Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tumosan 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 Tumosan Motor ve 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.