Correlation Between Misr National and Misr Chemical

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

Diversification Opportunities for Misr National and Misr Chemical

0.15

Correlation Coefficient

Misr National  Misr Chemical

Average diversification

The 3 months correlation between Misr and Misr is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Misr National Steel 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 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 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 Misr National i.e., Misr National and Misr Chemical go up and down completely randomly.

Pair Corralation between Misr National and Misr Chemical

Assuming the 90 days trading horizon Misr National Steel is expected to generate 1.08 times more return on investment than Misr Chemical. However, Misr National is 1.08 times more volatile than Misr Chemical Industries. It trades about 0.1 of its potential returns per unit of risk. Misr Chemical Industries is currently generating about 0.04 per unit of risk. If you would invest  128.00  in Misr National Steel on September 20, 2024 and sell it today you would earn a total of  392.00  from holding Misr National Steel or generate 306.25% return on investment over 90 days.

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

Misr National Steel  vs.  Misr Chemical Industries

Misr National Steel

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Misr National Steel are ranked lower than 8 (%) 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.

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 latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Misr National and Misr Chemical

The main advantage of trading using opposite Misr National and Misr Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Misr National 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 Misr National Steel 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.