Correlation Between Misr National and Egyptian Transport

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

Diversification Opportunities for Misr National and Egyptian Transport

0.77

Correlation Coefficient

Misr National  Egyptian Transport

Poor diversification

The 3 months correlation between Misr and Egyptian is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Misr National Steel and Egyptian Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Transport 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 Egyptian Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Transport has no effect on the direction of Misr National i.e., Misr National and Egyptian Transport go up and down completely randomly.

Pair Corralation between Misr National and Egyptian Transport

Assuming the 90 days trading horizon Misr National is expected to generate 1.89 times less return on investment than Egyptian Transport. But when comparing it to its historical volatility, Misr National Steel is 1.33 times less risky than Egyptian Transport. It trades about 0.22 of its potential returns per unit of risk. Egyptian Transport is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  404.00  in Egyptian Transport on September 16, 2024 and sell it today you would earn a total of  200.00  from holding Egyptian Transport or generate 49.5% return on investment over 90 days.

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

Misr National Steel  vs.  Egyptian Transport

Misr National Steel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Misr National Steel are ranked lower than 10 (%) 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.

Egyptian Transport

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Transport are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Misr National and Egyptian Transport

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

The idea behind Misr National Steel and Egyptian Transport 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.