Correlation Between Arabian Food and Egypt Aluminum

Can any of the company-specific risk be diversified away by investing in both Arabian Food and Egypt Aluminum 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 Arabian Food and Egypt Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arabian Food Industries and Egypt Aluminum, you can compare the effects of market volatilities on Arabian Food and Egypt Aluminum 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 Arabian Food with a short position of Egypt Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arabian Food and Egypt Aluminum.

Diversification Opportunities for Arabian Food and Egypt Aluminum

-0.27

Correlation Coefficient

Arabian Food  Egypt Aluminum

Very good diversification

The 3 months correlation between Arabian and Egypt is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Arabian Food Industries and Egypt Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egypt Aluminum and Arabian Food 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 Arabian Food Industries are associated (or correlated) with Egypt Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egypt Aluminum has no effect on the direction of Arabian Food i.e., Arabian Food and Egypt Aluminum go up and down completely randomly.

Pair Corralation between Arabian Food and Egypt Aluminum

Assuming the 90 days trading horizon Arabian Food Industries is expected to generate 2.25 times more return on investment than Egypt Aluminum. However, Arabian Food is 2.25 times more volatile than Egypt Aluminum. It trades about 0.2 of its potential returns per unit of risk. Egypt Aluminum is currently generating about 0.09 per unit of risk. If you would invest  1,901  in Arabian Food Industries on October 11, 2024 and sell it today you would earn a total of  849.00  from holding Arabian Food Industries or generate 44.66% return on investment over 90 days.

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

Arabian Food Industries  vs.  Egypt Aluminum

Arabian Food Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arabian Food Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arabian Food reported solid returns over the last few months and may actually be approaching a breakup point.

Egypt Aluminum

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Egypt Aluminum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egypt Aluminum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Arabian Food and Egypt Aluminum

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

The idea behind Arabian Food Industries and Egypt Aluminum 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.