Correlation Between Turk Telekomunikasyon and Orange SA

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

By analyzing existing cross correlation between Turk Telekomunikasyon AS and Orange SA ADR, you can compare the effects of market volatilities on Turk Telekomunikasyon and Orange SA 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 Turk Telekomunikasyon with a short position of Orange SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Turk Telekomunikasyon and Orange SA.

Diversification Opportunities for Turk Telekomunikasyon and Orange SA

0.7

Correlation Coefficient

Turk Telekomunikasyon  Orange SA

Poor diversification

The 3 months correlation between Turk and Orange is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Turk Telekomunikasyon AS and Orange SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA ADR and Turk Telekomunikasyon 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 Turk Telekomunikasyon AS are associated (or correlated) with Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA ADR has no effect on the direction of Turk Telekomunikasyon i.e., Turk Telekomunikasyon and Orange SA go up and down completely randomly.

Pair Corralation between Turk Telekomunikasyon and Orange SA

Assuming the 90 days horizon Turk Telekomunikasyon is expected to generate 13.69 times less return on investment than Orange SA. But when comparing it to its historical volatility, Turk Telekomunikasyon AS is 8.57 times less risky than Orange SA. It trades about 0.03 of its potential returns per unit of risk. Orange SA ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  870.00  in Orange SA ADR on October 9, 2024 and sell it today you would earn a total of  1,319,130  from holding Orange SA ADR or generate 151624.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.43%
Values	Daily Returns

Turk Telekomunikasyon AS  vs.  Orange SA ADR

Turk Telekomunikasyon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Turk Telekomunikasyon AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Orange SA ADR

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Orange SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very abnormal basic indicators, Orange SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Turk Telekomunikasyon and Orange SA

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

The idea behind Turk Telekomunikasyon AS and Orange SA ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.