Correlation Between Egyptian Financial and Telecom Egypt

Can any of the company-specific risk be diversified away by investing in both Egyptian Financial and Telecom Egypt 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 Telecom Egypt 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 Telecom Egypt, you can compare the effects of market volatilities on Egyptian Financial and Telecom Egypt 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 Telecom Egypt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Financial and Telecom Egypt.

Diversification Opportunities for Egyptian Financial and Telecom Egypt

-0.27

Correlation Coefficient

Egyptian Financial  Telecom Egypt

Very good diversification

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

Pair Corralation between Egyptian Financial and Telecom Egypt

Assuming the 90 days trading horizon Egyptian Financial Industrial is expected to generate 1.45 times more return on investment than Telecom Egypt. However, Egyptian Financial is 1.45 times more volatile than Telecom Egypt. It trades about 0.11 of its potential returns per unit of risk. Telecom Egypt is currently generating about 0.05 per unit of risk. If you would invest  4,469  in Egyptian Financial Industrial on October 11, 2024 and sell it today you would earn a total of  11,531  from holding Egyptian Financial Industrial or generate 258.02% return on investment over 90 days.

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

Egyptian Financial Industrial  vs.  Telecom Egypt

Egyptian Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Financial Industrial are ranked lower than 9 (%) 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.

Telecom Egypt

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Egypt are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Telecom Egypt may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Egyptian Financial and Telecom Egypt

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

The idea behind Egyptian Financial Industrial and Telecom Egypt 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.