Correlation Between Cairo Mezz and Wool Industry

Can any of the company-specific risk be diversified away by investing in both Cairo Mezz and Wool Industry 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 Cairo Mezz and Wool Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cairo Mezz PLC and Wool Industry Tria, you can compare the effects of market volatilities on Cairo Mezz and Wool Industry 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 Cairo Mezz with a short position of Wool Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairo Mezz and Wool Industry.

Diversification Opportunities for Cairo Mezz and Wool Industry

-0.34

Correlation Coefficient

Cairo Mezz  Wool Industry

Very good diversification

The 3 months correlation between Cairo and Wool is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Mezz PLC and Wool Industry Tria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wool Industry Tria and Cairo Mezz 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 Cairo Mezz PLC are associated (or correlated) with Wool Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wool Industry Tria has no effect on the direction of Cairo Mezz i.e., Cairo Mezz and Wool Industry go up and down completely randomly.

Pair Corralation between Cairo Mezz and Wool Industry

Assuming the 90 days trading horizon Cairo Mezz is expected to generate 6.18 times less return on investment than Wool Industry. But when comparing it to its historical volatility, Cairo Mezz PLC is 2.98 times less risky than Wool Industry. It trades about 0.03 of its potential returns per unit of risk. Wool Industry Tria is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  448.00  in Wool Industry Tria on December 27, 2024 and sell it today you would earn a total of  52.00  from holding Wool Industry Tria or generate 11.61% return on investment over 90 days.

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

Cairo Mezz PLC  vs.  Wool Industry Tria

Cairo Mezz PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Mezz PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cairo Mezz is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Wool Industry Tria

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wool Industry Tria are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Wool Industry unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cairo Mezz and Wool Industry

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

The idea behind Cairo Mezz PLC and Wool Industry Tria 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.