Correlation Between Arab Moltaka and Misr Chemical

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

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

Diversification Opportunities for Arab Moltaka and Misr Chemical

0.19

Correlation Coefficient

Arab Moltaka  Misr Chemical

Average diversification

The 3 months correlation between Arab and Misr is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Arab Moltaka Investments and Misr Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr Chemical Industries and Arab Moltaka 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 Arab Moltaka Investments are associated (or correlated) with Misr Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr Chemical Industries has no effect on the direction of Arab Moltaka i.e., Arab Moltaka and Misr Chemical go up and down completely randomly.

Pair Corralation between Arab Moltaka and Misr Chemical

Assuming the 90 days trading horizon Arab Moltaka Investments is expected to under-perform the Misr Chemical. In addition to that, Arab Moltaka is 1.38 times more volatile than Misr Chemical Industries. It trades about -0.17 of its total potential returns per unit of risk. Misr Chemical Industries is currently generating about -0.21 per unit of volatility. If you would invest  2,893  in Misr Chemical Industries on October 11, 2024 and sell it today you would lose (200.00) from holding Misr Chemical Industries or give up 6.91% of portfolio value over 90 days.

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

Arab Moltaka Investments  vs.  Misr Chemical Industries

Arab Moltaka Investments

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arab Moltaka Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arab Moltaka reported solid returns over the last few months and may actually be approaching a breakup point.

Misr Chemical Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Misr Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Arab Moltaka and Misr Chemical

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

The idea behind Arab Moltaka Investments and Misr 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.