Correlation Between Arabia Investments and Misr Oils

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

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

Diversification Opportunities for Arabia Investments and Misr Oils

-0.49

Correlation Coefficient

Arabia Investments  Misr Oils

Very good diversification

The 3 months correlation between Arabia and Misr is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Arabia Investments Holding and Misr Oils Soap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr Oils Soap and Arabia Investments 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 Arabia Investments Holding are associated (or correlated) with Misr Oils. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr Oils Soap has no effect on the direction of Arabia Investments i.e., Arabia Investments and Misr Oils go up and down completely randomly.

Pair Corralation between Arabia Investments and Misr Oils

Assuming the 90 days trading horizon Arabia Investments is expected to generate 1.1 times less return on investment than Misr Oils. In addition to that, Arabia Investments is 1.28 times more volatile than Misr Oils Soap. It trades about 0.03 of its total potential returns per unit of risk. Misr Oils Soap is currently generating about 0.04 per unit of volatility. If you would invest  5,856  in Misr Oils Soap on September 16, 2024 and sell it today you would earn a total of  158.00  from holding Misr Oils Soap or generate 2.7% return on investment over 90 days.

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

Arabia Investments Holding  vs.  Misr Oils Soap

Arabia Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arabia Investments Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Arabia Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Misr Oils Soap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Oils Soap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Misr Oils is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arabia Investments and Misr Oils

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

The idea behind Arabia Investments Holding and Misr 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..