Correlation Between Cairo For and Egyptian Gulf

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

By analyzing existing cross correlation between Cairo For Investment and Egyptian Gulf Bank, you can compare the effects of market volatilities on Cairo For and Egyptian Gulf 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 For with a short position of Egyptian Gulf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairo For and Egyptian Gulf.

Diversification Opportunities for Cairo For and Egyptian Gulf

0.38

Correlation Coefficient

Cairo For  Egyptian Gulf

Weak diversification

The 3 months correlation between Cairo and Egyptian is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cairo For Investment and Egyptian Gulf Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Gulf Bank and Cairo For 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 For Investment are associated (or correlated) with Egyptian Gulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Gulf Bank has no effect on the direction of Cairo For i.e., Cairo For and Egyptian Gulf go up and down completely randomly.

Pair Corralation between Cairo For and Egyptian Gulf

Assuming the 90 days trading horizon Cairo For Investment is expected to under-perform the Egyptian Gulf. In addition to that, Cairo For is 1.05 times more volatile than Egyptian Gulf Bank. It trades about -0.35 of its total potential returns per unit of risk. Egyptian Gulf Bank is currently generating about -0.13 per unit of volatility. If you would invest  29.00  in Egyptian Gulf Bank on December 4, 2024 and sell it today you would lose (1.00) from holding Egyptian Gulf Bank or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Cairo For Investment  vs.  Egyptian Gulf Bank

Cairo For Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo For Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Cairo For may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Egyptian Gulf Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Egyptian Gulf Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Egyptian Gulf is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cairo For and Egyptian Gulf

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

The idea behind Cairo For Investment and Egyptian Gulf Bank 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.