Correlation Between Act Financial and Egyptian Chemical

Can any of the company-specific risk be diversified away by investing in both Act Financial and Egyptian Chemical 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 Act Financial and Egyptian Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Act Financial and Egyptian Chemical

0.52

Correlation Coefficient

Act Financial  Egyptian Chemical

Very weak diversification

The 3 months correlation between Act and Egyptian is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Act Financial and Egyptian Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Chemical and Act Financial 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 Act Financial are associated (or correlated) with Egyptian Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Chemical has no effect on the direction of Act Financial i.e., Act Financial and Egyptian Chemical go up and down completely randomly.

Pair Corralation between Act Financial and Egyptian Chemical

Assuming the 90 days trading horizon Act Financial is expected to under-perform the Egyptian Chemical. In addition to that, Act Financial is 1.08 times more volatile than Egyptian Chemical Industries. It trades about 0.0 of its total potential returns per unit of risk. Egyptian Chemical Industries is currently generating about 0.08 per unit of volatility. If you would invest  802.00  in Egyptian Chemical Industries on December 5, 2024 and sell it today you would earn a total of  63.00  from holding Egyptian Chemical Industries or generate 7.86% return on investment over 90 days.

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

Act Financial  vs.  Egyptian Chemical Industries

Act Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Act Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Act Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Egyptian Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Chemical Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Chemical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Act Financial and Egyptian Chemical

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

The idea behind Act Financial and Egyptian Chemical Industries 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.