Correlation Between Al Tawfeek and Egyptian Chemical

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

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

Diversification Opportunities for Al Tawfeek and Egyptian Chemical

-0.16

Correlation Coefficient

Al Tawfeek  Egyptian Chemical

Good diversification

The 3 months correlation between ATLC and Egyptian is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Al Tawfeek Leasing and Egyptian Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Chemical and Al Tawfeek 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 Tawfeek Leasing are associated (or correlated) with Egyptian Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Chemical has no effect on the direction of Al Tawfeek i.e., Al Tawfeek and Egyptian Chemical go up and down completely randomly.

Pair Corralation between Al Tawfeek and Egyptian Chemical

Assuming the 90 days trading horizon Al Tawfeek is expected to generate 38.77 times less return on investment than Egyptian Chemical. In addition to that, Al Tawfeek is 1.57 times more volatile than Egyptian Chemical Industries. It trades about 0.0 of its total potential returns per unit of risk. Egyptian Chemical Industries is currently generating about 0.11 per unit of volatility. If you would invest  730.00  in Egyptian Chemical Industries on December 22, 2024 and sell it today you would earn a total of  83.00  from holding Egyptian Chemical Industries or generate 11.37% return on investment over 90 days.

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

Al Tawfeek Leasing  vs.  Egyptian Chemical Industries

Al Tawfeek Leasing

Risk-Adjusted Performance

Very Weak

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

Egyptian Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Chemical Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Egyptian Chemical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Tawfeek and Egyptian Chemical

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

The idea behind Al Tawfeek Leasing and Egyptian 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.