Correlation Between BIST Electricity and Ege Endustri

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

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

Diversification Opportunities for BIST Electricity and Ege Endustri

0.59

Correlation Coefficient

BIST Electricity  Ege Endustri

Very weak diversification

The 3 months correlation between BIST and Ege is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BIST Electricity 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 BIST Electricity 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 BIST Electricity 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 BIST Electricity i.e., BIST Electricity and Ege Endustri go up and down completely randomly.

Pair Corralation between BIST Electricity and Ege Endustri

Assuming the 90 days trading horizon BIST Electricity is expected to under-perform the Ege Endustri. But the index apears to be less risky and, when comparing its historical volatility, BIST Electricity is 1.32 times less risky than Ege Endustri. The index trades about -0.08 of its potential returns per unit of risk. The Ege Endustri ve is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  987,077  in Ege Endustri ve on December 30, 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	Weak
Accuracy	100.0%
Values	Daily Returns

BIST Electricity  vs.  Ege Endustri ve

Pair Trading with BIST Electricity and Ege Endustri

The main advantage of trading using opposite BIST Electricity and Ege Endustri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BIST Electricity 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 BIST Electricity 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.