Correlation Between Arab Aluminum and Cairo Educational

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

By analyzing existing cross correlation between Arab Aluminum and Cairo Educational Services, you can compare the effects of market volatilities on Arab Aluminum and Cairo Educational 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 Aluminum with a short position of Cairo Educational. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arab Aluminum and Cairo Educational.

Diversification Opportunities for Arab Aluminum and Cairo Educational

0.06

Correlation Coefficient

Arab Aluminum  Cairo Educational

Significant diversification

The 3 months correlation between Arab and Cairo is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Arab Aluminum and Cairo Educational Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairo Educational and Arab Aluminum 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 Aluminum are associated (or correlated) with Cairo Educational. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairo Educational has no effect on the direction of Arab Aluminum i.e., Arab Aluminum and Cairo Educational go up and down completely randomly.

Pair Corralation between Arab Aluminum and Cairo Educational

Assuming the 90 days trading horizon Arab Aluminum is expected to under-perform the Cairo Educational. But the stock apears to be less risky and, when comparing its historical volatility, Arab Aluminum is 2.79 times less risky than Cairo Educational. The stock trades about -0.64 of its potential returns per unit of risk. The Cairo Educational Services is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,821  in Cairo Educational Services on October 10, 2024 and sell it today you would earn a total of  147.00  from holding Cairo Educational Services or generate 5.21% return on investment over 90 days.

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

Arab Aluminum  vs.  Cairo Educational Services

Arab Aluminum

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arab Aluminum are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Arab Aluminum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cairo Educational

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Arab Aluminum and Cairo Educational

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

The idea behind Arab Aluminum and Cairo Educational Services 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.