Correlation Between Egyptian Financial and Mohandes Insurance

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

Diversification Opportunities for Egyptian Financial and Mohandes Insurance

0.61

Correlation Coefficient

Egyptian Financial  Mohandes Insurance

Poor diversification

The 3 months correlation between Egyptian and Mohandes is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Financial Industrial and Mohandes Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mohandes Insurance 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 Mohandes Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mohandes Insurance has no effect on the direction of Egyptian Financial i.e., Egyptian Financial and Mohandes Insurance go up and down completely randomly.

Pair Corralation between Egyptian Financial and Mohandes Insurance

Assuming the 90 days trading horizon Egyptian Financial is expected to generate 2.88 times less return on investment than Mohandes Insurance. But when comparing it to its historical volatility, Egyptian Financial Industrial is 1.54 times less risky than Mohandes Insurance. It trades about 0.12 of its potential returns per unit of risk. Mohandes Insurance is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,908  in Mohandes Insurance on October 11, 2024 and sell it today you would earn a total of  694.00  from holding Mohandes Insurance or generate 36.37% 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.  Mohandes Insurance

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.

Mohandes Insurance

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mohandes Insurance are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Mohandes Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Egyptian Financial and Mohandes Insurance

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

The idea behind Egyptian Financial Industrial and Mohandes Insurance 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.