Correlation Between Contact Financial and Misr Oils

Can any of the company-specific risk be diversified away by investing in both Contact Financial and Misr Oils 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 Contact Financial and Misr Oils into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Contact Financial Holding and Misr Oils Soap, you can compare the effects of market volatilities on Contact Financial and Misr Oils 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 Contact Financial with a short position of Misr Oils. Check out your portfolio center. Please also check ongoing floating volatility patterns of Contact Financial and Misr Oils.

Diversification Opportunities for Contact Financial and Misr Oils

0.23

Correlation Coefficient

Contact Financial  Misr Oils

Modest diversification

The 3 months correlation between Contact and Misr is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Contact Financial Holding and Misr Oils Soap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr Oils Soap and Contact Financial 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 Contact Financial Holding are associated (or correlated) with Misr Oils. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr Oils Soap has no effect on the direction of Contact Financial i.e., Contact Financial and Misr Oils go up and down completely randomly.

Pair Corralation between Contact Financial and Misr Oils

Assuming the 90 days trading horizon Contact Financial Holding is expected to generate 2.5 times more return on investment than Misr Oils. However, Contact Financial is 2.5 times more volatile than Misr Oils Soap. It trades about 0.06 of its potential returns per unit of risk. Misr Oils Soap is currently generating about 0.04 per unit of risk. If you would invest  420.00  in Contact Financial Holding on September 15, 2024 and sell it today you would earn a total of  45.00  from holding Contact Financial Holding or generate 10.71% return on investment over 90 days.

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

Contact Financial Holding  vs.  Misr Oils Soap

Contact Financial Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Contact Financial Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Contact Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Misr Oils Soap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Oils Soap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Misr Oils is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Contact Financial and Misr Oils

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

The idea behind Contact Financial Holding and Misr Oils Soap 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.