Correlation Between Egyptian Financial and B Investments

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

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

Diversification Opportunities for Egyptian Financial and B Investments

0.74

Correlation Coefficient

Egyptian Financial  B Investments

Poor diversification

The 3 months correlation between Egyptian and BINV is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Financial Industrial and B Investments Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Investments Holding and Egyptian 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 Egyptian Financial Industrial are associated (or correlated) with B Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Investments Holding has no effect on the direction of Egyptian Financial i.e., Egyptian Financial and B Investments go up and down completely randomly.

Pair Corralation between Egyptian Financial and B Investments

Assuming the 90 days trading horizon Egyptian Financial is expected to generate 1.56 times less return on investment than B Investments. But when comparing it to its historical volatility, Egyptian Financial Industrial is 1.39 times less risky than B Investments. It trades about 0.1 of its potential returns per unit of risk. B Investments Holding is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,456  in B Investments Holding on September 16, 2024 and sell it today you would earn a total of  65.00  from holding B Investments Holding or generate 2.65% return on investment over 90 days.

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

Egyptian Financial Industrial  vs.  B Investments Holding

Egyptian Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Financial Industrial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Financial reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Egyptian Financial and B Investments

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

The idea behind Egyptian Financial Industrial and B Investments Holding 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.