Correlation Between Mohawk Industries and Arcelik AS

Can any of the company-specific risk be diversified away by investing in both Mohawk Industries and Arcelik AS 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 Mohawk Industries and Arcelik AS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mohawk Industries and Arcelik AS ADR, you can compare the effects of market volatilities on Mohawk Industries and Arcelik AS 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 Mohawk Industries with a short position of Arcelik AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mohawk Industries and Arcelik AS.

Diversification Opportunities for Mohawk Industries and Arcelik AS

0.61

Correlation Coefficient

Mohawk Industries  Arcelik AS

Poor diversification

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

Pair Corralation between Mohawk Industries and Arcelik AS

Considering the 90-day investment horizon Mohawk Industries is expected to under-perform the Arcelik AS. But the stock apears to be less risky and, when comparing its historical volatility, Mohawk Industries is 1.24 times less risky than Arcelik AS. The stock trades about -0.05 of its potential returns per unit of risk. The Arcelik AS ADR is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,050  in Arcelik AS ADR on September 5, 2024 and sell it today you would lose (117.00) from holding Arcelik AS ADR or give up 5.71% of portfolio value over 90 days.

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

Mohawk Industries  vs.  Arcelik AS ADR

Mohawk Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mohawk Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Arcelik AS ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcelik AS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Arcelik AS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mohawk Industries and Arcelik AS

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

The idea behind Mohawk Industries and Arcelik AS ADR 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.