Correlation Between Misr National and Arab Dairy

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

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

Diversification Opportunities for Misr National and Arab Dairy

-0.21

Correlation Coefficient

Misr National  Arab Dairy

Very good diversification

The 3 months correlation between Misr and Arab is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Misr National Steel and The Arab Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arab Dairy and Misr National 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 Misr National Steel are associated (or correlated) with Arab Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arab Dairy has no effect on the direction of Misr National i.e., Misr National and Arab Dairy go up and down completely randomly.

Pair Corralation between Misr National and Arab Dairy

Assuming the 90 days trading horizon Misr National Steel is expected to generate 2.48 times more return on investment than Arab Dairy. However, Misr National is 2.48 times more volatile than The Arab Dairy. It trades about 0.29 of its potential returns per unit of risk. The Arab Dairy is currently generating about 0.03 per unit of risk. If you would invest  508.00  in Misr National Steel on December 29, 2024 and sell it today you would earn a total of  446.00  from holding Misr National Steel or generate 87.8% return on investment over 90 days.

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

Misr National Steel  vs.  The Arab Dairy

Misr National Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Misr National Steel are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Misr National reported solid returns over the last few months and may actually be approaching a breakup point.

Arab Dairy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Arab Dairy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Arab Dairy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Misr National and Arab Dairy

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

The idea behind Misr National Steel and The Arab Dairy 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.