Correlation Between Misr National and Orascom Investment

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

Diversification Opportunities for Misr National and Orascom Investment

0.24

Correlation Coefficient

Misr National  Orascom Investment

Modest diversification

The 3 months correlation between Misr and Orascom is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Misr National Steel and Orascom Investment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orascom Investment 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 Orascom Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orascom Investment has no effect on the direction of Misr National i.e., Misr National and Orascom Investment go up and down completely randomly.

Pair Corralation between Misr National and Orascom Investment

Assuming the 90 days trading horizon Misr National Steel is expected to generate 0.47 times more return on investment than Orascom Investment. However, Misr National Steel is 2.13 times less risky than Orascom Investment. It trades about 0.16 of its potential returns per unit of risk. Orascom Investment Holding is currently generating about -0.06 per unit of risk. If you would invest  510.00  in Misr National Steel on October 23, 2024 and sell it today you would earn a total of  18.00  from holding Misr National Steel or generate 3.53% return on investment over 90 days.

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

Misr National Steel  vs.  Orascom Investment Holding

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 weak technical and fundamental indicators, Misr National reported solid returns over the last few months and may actually be approaching a breakup point.

Orascom Investment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orascom Investment Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Orascom Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Misr National and Orascom Investment

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

The idea behind Misr National Steel and Orascom Investment Holding 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 Transaction History module to view history of all your transactions and understand their impact on performance.