Correlation Between El Ahli and Cairo Oils

Can any of the company-specific risk be diversified away by investing in both El Ahli and Cairo Oils 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 El Ahli and Cairo Oils into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between El Ahli Investment and Cairo Oils Soap, you can compare the effects of market volatilities on El Ahli and Cairo Oils 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 El Ahli with a short position of Cairo Oils. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Ahli and Cairo Oils.

Diversification Opportunities for El Ahli and Cairo Oils

-0.72

Correlation Coefficient

El Ahli  Cairo Oils

Pay attention - limited upside

The 3 months correlation between AFDI and Cairo is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding El Ahli Investment and Cairo Oils Soap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairo Oils Soap and El Ahli 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 El Ahli Investment are associated (or correlated) with Cairo Oils. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairo Oils Soap has no effect on the direction of El Ahli i.e., El Ahli and Cairo Oils go up and down completely randomly.

Pair Corralation between El Ahli and Cairo Oils

Assuming the 90 days trading horizon El Ahli Investment is expected to under-perform the Cairo Oils. But the stock apears to be less risky and, when comparing its historical volatility, El Ahli Investment is 2.93 times less risky than Cairo Oils. The stock trades about -0.07 of its potential returns per unit of risk. The Cairo Oils Soap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Cairo Oils Soap on December 23, 2024 and sell it today you would earn a total of  8.00  from holding Cairo Oils Soap or generate 32.0% return on investment over 90 days.

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

El Ahli Investment  vs.  Cairo Oils Soap

El Ahli Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days El Ahli Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Cairo Oils Soap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Oils Soap are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Cairo Oils reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with El Ahli and Cairo Oils

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

The idea behind El Ahli Investment and Cairo Oils Soap 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.