Correlation Between Koc Holding and Federal Mogul

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

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

Diversification Opportunities for Koc Holding and Federal Mogul

0.71

Correlation Coefficient

Koc Holding  Federal Mogul

Poor diversification

The 3 months correlation between Koc and Federal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Koc Holding AS and Federal Mogul Izmit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Mogul Izmit and Koc Holding 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 Koc Holding AS are associated (or correlated) with Federal Mogul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Mogul Izmit has no effect on the direction of Koc Holding i.e., Koc Holding and Federal Mogul go up and down completely randomly.

Pair Corralation between Koc Holding and Federal Mogul

Assuming the 90 days trading horizon Koc Holding is expected to generate 16.17 times less return on investment than Federal Mogul. But when comparing it to its historical volatility, Koc Holding AS is 1.63 times less risky than Federal Mogul. It trades about 0.02 of its potential returns per unit of risk. Federal Mogul Izmit is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  29,150  in Federal Mogul Izmit on June 24, 2024 and sell it today you would earn a total of  3,100  from holding Federal Mogul Izmit or generate 10.63% return on investment over 90 days.

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

Koc Holding AS  vs.  Federal Mogul Izmit

Koc Holding AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koc Holding AS 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 October 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with Koc Holding and Federal Mogul

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

The idea behind Koc Holding AS and Federal Mogul Izmit 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.