Correlation Between Al Tawfeek and Misr Chemical

Can any of the company-specific risk be diversified away by investing in both Al Tawfeek and Misr 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 Misr 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 Misr Chemical Industries, you can compare the effects of market volatilities on Al Tawfeek and Misr 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 Misr Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Tawfeek and Misr Chemical.

Diversification Opportunities for Al Tawfeek and Misr Chemical

-0.11

Correlation Coefficient

Al Tawfeek  Misr Chemical

Good diversification

The 3 months correlation between ATLC and Misr is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Al Tawfeek Leasing and Misr Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr Chemical Industries 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 Misr Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr Chemical Industries has no effect on the direction of Al Tawfeek i.e., Al Tawfeek and Misr Chemical go up and down completely randomly.

Pair Corralation between Al Tawfeek and Misr Chemical

Assuming the 90 days trading horizon Al Tawfeek Leasing is expected to generate 0.47 times more return on investment than Misr Chemical. However, Al Tawfeek Leasing is 2.12 times less risky than Misr Chemical. It trades about 0.21 of its potential returns per unit of risk. Misr Chemical Industries is currently generating about -0.24 per unit of risk. If you would invest  430.00  in Al Tawfeek Leasing on September 19, 2024 and sell it today you would earn a total of  30.00  from holding Al Tawfeek Leasing or generate 6.98% 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.  Misr Chemical Industries

Al Tawfeek Leasing

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Al Tawfeek Leasing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Al Tawfeek reported solid returns over the last few months and may actually be approaching a breakup point.

Misr Chemical Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Al Tawfeek and Misr Chemical

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

The idea behind Al Tawfeek Leasing and Misr 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.