Correlation Between B Investments and Orascom Construction

Can any of the company-specific risk be diversified away by investing in both B Investments and Orascom Construction 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 B Investments and Orascom Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between B Investments Holding and Orascom Construction PLC, you can compare the effects of market volatilities on B Investments and Orascom Construction 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 B Investments with a short position of Orascom Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Investments and Orascom Construction.

Diversification Opportunities for B Investments and Orascom Construction

0.67

Correlation Coefficient

B Investments  Orascom Construction

Poor diversification

The 3 months correlation between BINV and Orascom is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding B Investments Holding and Orascom Construction PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orascom Construction PLC and B Investments 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 B Investments Holding are associated (or correlated) with Orascom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orascom Construction PLC has no effect on the direction of B Investments i.e., B Investments and Orascom Construction go up and down completely randomly.

Pair Corralation between B Investments and Orascom Construction

Assuming the 90 days trading horizon B Investments is expected to generate 1.49 times less return on investment than Orascom Construction. But when comparing it to its historical volatility, B Investments Holding is 1.25 times less risky than Orascom Construction. It trades about 0.12 of its potential returns per unit of risk. Orascom Construction PLC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  24,400  in Orascom Construction PLC on September 15, 2024 and sell it today you would earn a total of  4,300  from holding Orascom Construction PLC or generate 17.62% return on investment over 90 days.

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

B Investments Holding  vs.  Orascom Construction PLC

B Investments Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B Investments Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, B Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Orascom Construction PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orascom Construction PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Orascom Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with B Investments and Orascom Construction

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

The idea behind B Investments Holding and Orascom Construction PLC 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.