Correlation Between Egypt Aluminum and Export Development

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

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

Diversification Opportunities for Egypt Aluminum and Export Development

-0.09

Correlation Coefficient

Egypt Aluminum  Export Development

Good diversification

The 3 months correlation between Egypt and Export is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Egypt Aluminum and Export Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Export Development Bank and Egypt Aluminum 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 Egypt Aluminum are associated (or correlated) with Export Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Export Development Bank has no effect on the direction of Egypt Aluminum i.e., Egypt Aluminum and Export Development go up and down completely randomly.

Pair Corralation between Egypt Aluminum and Export Development

Assuming the 90 days trading horizon Egypt Aluminum is expected to generate 1.74 times more return on investment than Export Development. However, Egypt Aluminum is 1.74 times more volatile than Export Development Bank. It trades about 0.27 of its potential returns per unit of risk. Export Development Bank is currently generating about 0.11 per unit of risk. If you would invest  11,736  in Egypt Aluminum on December 23, 2024 and sell it today you would earn a total of  6,129  from holding Egypt Aluminum or generate 52.22% return on investment over 90 days.

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

Egypt Aluminum  vs.  Export Development Bank

Egypt Aluminum

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egypt Aluminum are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egypt Aluminum reported solid returns over the last few months and may actually be approaching a breakup point.

Export Development Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Export Development Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Export Development reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Egypt Aluminum and Export Development

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

The idea behind Egypt Aluminum and Export Development Bank 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.