Correlation Between Arab Aluminum and Misr Oils

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

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

Diversification Opportunities for Arab Aluminum and Misr Oils

0.44

Correlation Coefficient

Arab Aluminum  Misr Oils

Very weak diversification

The 3 months correlation between Arab and Misr is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Arab Aluminum 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 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 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 Arab Aluminum i.e., Arab Aluminum and Misr Oils go up and down completely randomly.

Pair Corralation between Arab Aluminum and Misr Oils

Assuming the 90 days trading horizon Arab Aluminum is expected to generate 13.01 times more return on investment than Misr Oils. However, Arab Aluminum is 13.01 times more volatile than Misr Oils Soap. It trades about 0.04 of its potential returns per unit of risk. Misr Oils Soap is currently generating about 0.09 per unit of risk. If you would invest  6,769  in Arab Aluminum on December 4, 2024 and sell it today you would lose (5,413) from holding Arab Aluminum or give up 79.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.74%
Values	Daily Returns

Arab Aluminum  vs.  Misr Oils Soap

Arab Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arab Aluminum 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Misr Oils Soap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Misr Oils Soap 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.

Pair Trading with Arab Aluminum and Misr Oils

The main advantage of trading using opposite Arab Aluminum and Misr Oils positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arab Aluminum 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 Arab Aluminum 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 Transaction History module to view history of all your transactions and understand their impact on performance.