Correlation Between Federal Mogul and BIM Birlesik

Can any of the company-specific risk be diversified away by investing in both Federal Mogul and BIM Birlesik 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 Federal Mogul and BIM Birlesik into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federal Mogul Izmit and BIM Birlesik Magazalar, you can compare the effects of market volatilities on Federal Mogul and BIM Birlesik 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 Federal Mogul with a short position of BIM Birlesik. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Mogul and BIM Birlesik.

Diversification Opportunities for Federal Mogul and BIM Birlesik

0.61

Correlation Coefficient

Federal Mogul  BIM Birlesik

Poor diversification

The 3 months correlation between Federal and BIM is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Federal Mogul Izmit and BIM Birlesik Magazalar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIM Birlesik Magazalar and Federal Mogul 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 Federal Mogul Izmit are associated (or correlated) with BIM Birlesik. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIM Birlesik Magazalar has no effect on the direction of Federal Mogul i.e., Federal Mogul and BIM Birlesik go up and down completely randomly.

Pair Corralation between Federal Mogul and BIM Birlesik

Assuming the 90 days trading horizon Federal Mogul Izmit is expected to generate 0.98 times more return on investment than BIM Birlesik. However, Federal Mogul Izmit is 1.02 times less risky than BIM Birlesik. It trades about -0.02 of its potential returns per unit of risk. BIM Birlesik Magazalar is currently generating about -0.08 per unit of risk. If you would invest  34,250  in Federal Mogul Izmit on September 22, 2024 and sell it today you would lose (1,750) from holding Federal Mogul Izmit or give up 5.11% of portfolio value over 90 days.

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

Federal Mogul Izmit  vs.  BIM Birlesik Magazalar

Federal Mogul Izmit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Mogul Izmit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Federal Mogul is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

BIM Birlesik Magazalar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BIM Birlesik Magazalar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Federal Mogul and BIM Birlesik

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

The idea behind Federal Mogul Izmit and BIM Birlesik Magazalar 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.