Correlation Between Misr National and Ismailia National

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

Diversification Opportunities for Misr National and Ismailia National

0.63

Correlation Coefficient

Misr National  Ismailia National

Poor diversification

The 3 months correlation between Misr and Ismailia is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Misr National Steel and Ismailia National Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ismailia National Food 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 Ismailia National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ismailia National Food has no effect on the direction of Misr National i.e., Misr National and Ismailia National go up and down completely randomly.

Pair Corralation between Misr National and Ismailia National

Assuming the 90 days trading horizon Misr National Steel is expected to generate 1.68 times more return on investment than Ismailia National. However, Misr National is 1.68 times more volatile than Ismailia National Food. It trades about 0.14 of its potential returns per unit of risk. Ismailia National Food is currently generating about 0.04 per unit of risk. If you would invest  454.00  in Misr National Steel on September 17, 2024 and sell it today you would earn a total of  90.00  from holding Misr National Steel or generate 19.82% 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.  Ismailia National Food

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.

Ismailia National Food

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ismailia National Food are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ismailia National 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 Ismailia National

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

The idea behind Misr National Steel and Ismailia National Food 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.