Correlation Between BIST Electricity and Global Yatirim

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

By analyzing existing cross correlation between BIST Electricity and Global Yatirim Holding, you can compare the effects of market volatilities on BIST Electricity and Global Yatirim 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 Global Yatirim. Check out your portfolio center. Please also check ongoing floating volatility patterns of BIST Electricity and Global Yatirim.

Diversification Opportunities for BIST Electricity and Global Yatirim

0.05

Correlation Coefficient

BIST Electricity  Global Yatirim

Significant diversification

The 3 months correlation between BIST and Global is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BIST Electricity and Global Yatirim Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Yatirim Holding 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 Global Yatirim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Yatirim Holding has no effect on the direction of BIST Electricity i.e., BIST Electricity and Global Yatirim go up and down completely randomly.

Pair Corralation between BIST Electricity and Global Yatirim

Assuming the 90 days trading horizon BIST Electricity is expected to under-perform the Global Yatirim. But the index apears to be less risky and, when comparing its historical volatility, BIST Electricity is 1.87 times less risky than Global Yatirim. The index trades about -0.1 of its potential returns per unit of risk. The Global Yatirim Holding is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  560.00  in Global Yatirim Holding on December 23, 2024 and sell it today you would earn a total of  147.00  from holding Global Yatirim Holding or generate 26.25% return on investment over 90 days.

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

BIST Electricity  vs.  Global Yatirim Holding

Pair Trading with BIST Electricity and Global Yatirim

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

The idea behind BIST Electricity and Global Yatirim Holding 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.