Correlation Between Al Arafa and Egyptian Financial

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

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

Diversification Opportunities for Al Arafa and Egyptian Financial

0.0

Correlation Coefficient

Al Arafa  Egyptian Financial

Pay attention - limited upside

The 3 months correlation between AIVCB and Egyptian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Al Arafa Investment and Egyptian Financial Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Financial and Al Arafa 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 Al Arafa Investment are associated (or correlated) with Egyptian Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Financial has no effect on the direction of Al Arafa i.e., Al Arafa and Egyptian Financial go up and down completely randomly.

Pair Corralation between Al Arafa and Egyptian Financial

If you would invest  5,943  in Egyptian Financial Industrial on September 17, 2024 and sell it today you would earn a total of  9,157  from holding Egyptian Financial Industrial or generate 154.08% return on investment over 90 days.

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

Al Arafa Investment  vs.  Egyptian Financial Industrial

Al Arafa Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Al Arafa Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Al Arafa is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Egyptian Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Financial Industrial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Arafa and Egyptian Financial

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

The idea behind Al Arafa Investment and Egyptian Financial Industrial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.