Correlation Between Egyptian Financial and Misr Oils

Can any of the company-specific risk be diversified away by investing in both Egyptian 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 Egyptian 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 Egyptian Financial Industrial and Misr Oils Soap, you can compare the effects of market volatilities on Egyptian 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 Egyptian Financial with a short position of Misr Oils. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Financial and Misr Oils.

Diversification Opportunities for Egyptian Financial and Misr Oils

-0.4

Correlation Coefficient

Egyptian Financial  Misr Oils

Very good diversification

The 3 months correlation between Egyptian and Misr is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Financial Industrial 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 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 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 Egyptian Financial i.e., Egyptian Financial and Misr Oils go up and down completely randomly.

Pair Corralation between Egyptian Financial and Misr Oils

Assuming the 90 days trading horizon Egyptian Financial Industrial is expected to generate 1.62 times more return on investment than Misr Oils. However, Egyptian Financial is 1.62 times more volatile than Misr Oils Soap. It trades about 0.0 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  15,000  in Egyptian Financial Industrial on December 23, 2024 and sell it today you would lose (52.00) from holding Egyptian Financial Industrial or give up 0.35% of portfolio value over 90 days.

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

Egyptian Financial Industrial  vs.  Misr Oils Soap

Egyptian Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Egyptian Financial Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Egyptian Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Misr Oils Soap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Misr Oils Soap has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Egyptian Financial and Misr Oils

The main advantage of trading using opposite Egyptian Financial and Misr Oils positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Egyptian 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 Egyptian Financial Industrial 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.