Correlation Between Borusan Mannesmann and Kardemir Karabuk

Can any of the company-specific risk be diversified away by investing in both Borusan Mannesmann and Kardemir Karabuk 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 Borusan Mannesmann and Kardemir Karabuk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Borusan Mannesmann Boru and Kardemir Karabuk Demir, you can compare the effects of market volatilities on Borusan Mannesmann and Kardemir Karabuk 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 Borusan Mannesmann with a short position of Kardemir Karabuk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Borusan Mannesmann and Kardemir Karabuk.

Diversification Opportunities for Borusan Mannesmann and Kardemir Karabuk

-0.11

Correlation Coefficient

Borusan Mannesmann  Kardemir Karabuk

Good diversification

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

Pair Corralation between Borusan Mannesmann and Kardemir Karabuk

Assuming the 90 days trading horizon Borusan Mannesmann Boru is expected to generate 1.41 times more return on investment than Kardemir Karabuk. However, Borusan Mannesmann is 1.41 times more volatile than Kardemir Karabuk Demir. It trades about 0.1 of its potential returns per unit of risk. Kardemir Karabuk Demir is currently generating about 0.04 per unit of risk. If you would invest  8,450  in Borusan Mannesmann Boru on September 24, 2024 and sell it today you would earn a total of  35,075  from holding Borusan Mannesmann Boru or generate 415.09% return on investment over 90 days.

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

Borusan Mannesmann Boru  vs.  Kardemir Karabuk Demir

Borusan Mannesmann Boru

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borusan Mannesmann Boru 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.

Kardemir Karabuk Demir

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kardemir Karabuk Demir are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Kardemir Karabuk demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Borusan Mannesmann and Kardemir Karabuk

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

The idea behind Borusan Mannesmann Boru and Kardemir Karabuk Demir 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.