Correlation Between Misr National and Export Development

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

Diversification Opportunities for Misr National and Export Development

0.94

Correlation Coefficient

Misr National  Export Development

Almost no diversification

The 3 months correlation between Misr and Export is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Misr National Steel and Export Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Export Development Bank 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 Export Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Export Development Bank has no effect on the direction of Misr National i.e., Misr National and Export Development go up and down completely randomly.

Pair Corralation between Misr National and Export Development

Assuming the 90 days trading horizon Misr National Steel is expected to generate 0.82 times more return on investment than Export Development. However, Misr National Steel is 1.22 times less risky than Export Development. It trades about -0.27 of its potential returns per unit of risk. Export Development Bank is currently generating about -0.32 per unit of risk. If you would invest  555.00  in Misr National Steel on October 8, 2024 and sell it today you would lose (34.00) from holding Misr National Steel or give up 6.13% of portfolio value over 90 days.

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

Misr National Steel  vs.  Export Development Bank

Misr National Steel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Misr National Steel are ranked lower than 12 (%) 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.

Export Development Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Export Development Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Export Development reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Misr National and Export Development

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

The idea behind Misr National Steel and Export Development Bank 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.