Correlation Between BIST Electricity and Kafein Yazilim

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

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

Diversification Opportunities for BIST Electricity and Kafein Yazilim

-0.11

Correlation Coefficient

BIST Electricity  Kafein Yazilim

Good diversification

The 3 months correlation between BIST and Kafein is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding BIST Electricity and Kafein Yazilim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kafein Yazilim 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 Kafein Yazilim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kafein Yazilim has no effect on the direction of BIST Electricity i.e., BIST Electricity and Kafein Yazilim go up and down completely randomly.

Pair Corralation between BIST Electricity and Kafein Yazilim

Assuming the 90 days trading horizon BIST Electricity is expected to under-perform the Kafein Yazilim. But the index apears to be less risky and, when comparing its historical volatility, BIST Electricity is 1.82 times less risky than Kafein Yazilim. The index trades about -0.1 of its potential returns per unit of risk. The Kafein Yazilim is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,490  in Kafein Yazilim on December 22, 2024 and sell it today you would earn a total of  1,910  from holding Kafein Yazilim or generate 22.5% return on investment over 90 days.

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

BIST Electricity  vs.  Kafein Yazilim

Pair Trading with BIST Electricity and Kafein Yazilim

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

The idea behind BIST Electricity and Kafein Yazilim 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.