Correlation Between Egypt Aluminum and Housing Development

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

Diversification Opportunities for Egypt Aluminum and Housing Development

0.14

Correlation Coefficient

Egypt Aluminum  Housing Development

Average diversification

The 3 months correlation between Egypt and Housing is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Egypt Aluminum and Housing Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Housing 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 Housing Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Housing Development Bank has no effect on the direction of Egypt Aluminum i.e., Egypt Aluminum and Housing Development go up and down completely randomly.

Pair Corralation between Egypt Aluminum and Housing Development

Assuming the 90 days trading horizon Egypt Aluminum is expected to generate 1.47 times less return on investment than Housing Development. In addition to that, Egypt Aluminum is 1.73 times more volatile than Housing Development Bank. It trades about 0.11 of its total potential returns per unit of risk. Housing Development Bank is currently generating about 0.27 per unit of volatility. If you would invest  5,200  in Housing Development Bank on October 11, 2024 and sell it today you would earn a total of  201.00  from holding Housing Development Bank or generate 3.87% return on investment over 90 days.

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

Egypt Aluminum  vs.  Housing Development Bank

Egypt Aluminum

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Egypt Aluminum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egypt Aluminum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Housing Development Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Housing Development Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Housing Development reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Egypt Aluminum and Housing Development

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

The idea behind Egypt Aluminum and Housing 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.