Correlation Between Tofas Turk and Ege Endustri

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

By analyzing existing cross correlation between Tofas Turk Otomobil and Ege Endustri ve, you can compare the effects of market volatilities on Tofas Turk and Ege Endustri 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 Tofas Turk with a short position of Ege Endustri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tofas Turk and Ege Endustri.

Diversification Opportunities for Tofas Turk and Ege Endustri

0.33

Correlation Coefficient

Tofas Turk  Ege Endustri

Weak diversification

The 3 months correlation between Tofas and Ege is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tofas Turk Otomobil and Ege Endustri ve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ege Endustri ve and Tofas Turk 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 Tofas Turk Otomobil are associated (or correlated) with Ege Endustri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ege Endustri ve has no effect on the direction of Tofas Turk i.e., Tofas Turk and Ege Endustri go up and down completely randomly.

Pair Corralation between Tofas Turk and Ege Endustri

Assuming the 90 days trading horizon Tofas Turk Otomobil is expected to under-perform the Ege Endustri. In addition to that, Tofas Turk is 1.13 times more volatile than Ege Endustri ve. It trades about -0.05 of its total potential returns per unit of risk. Ege Endustri ve is currently generating about -0.02 per unit of volatility. If you would invest  987,077  in Ege Endustri ve on December 29, 2024 and sell it today you would lose (48,077) from holding Ege Endustri ve or give up 4.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Tofas Turk Otomobil  vs.  Ege Endustri ve

Tofas Turk Otomobil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tofas Turk Otomobil 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.

Ege Endustri ve

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ege Endustri ve has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Ege Endustri is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Tofas Turk and Ege Endustri

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

The idea behind Tofas Turk Otomobil and Ege Endustri ve 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.