Correlation Between Egypt Aluminum and Zahraa Maadi

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

By analyzing existing cross correlation between Egypt Aluminum and Zahraa Maadi Investment, you can compare the effects of market volatilities on Egypt Aluminum and Zahraa Maadi 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 Zahraa Maadi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egypt Aluminum and Zahraa Maadi.

Diversification Opportunities for Egypt Aluminum and Zahraa Maadi

-0.71

Correlation Coefficient

Egypt Aluminum  Zahraa Maadi

Pay attention - limited upside

The 3 months correlation between Egypt and Zahraa is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Egypt Aluminum and Zahraa Maadi Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zahraa Maadi Investment 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 Zahraa Maadi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zahraa Maadi Investment has no effect on the direction of Egypt Aluminum i.e., Egypt Aluminum and Zahraa Maadi go up and down completely randomly.

Pair Corralation between Egypt Aluminum and Zahraa Maadi

Assuming the 90 days trading horizon Egypt Aluminum is expected to generate 0.41 times more return on investment than Zahraa Maadi. However, Egypt Aluminum is 2.44 times less risky than Zahraa Maadi. It trades about 0.22 of its potential returns per unit of risk. Zahraa Maadi Investment is currently generating about -0.17 per unit of risk. If you would invest  11,762  in Egypt Aluminum on December 5, 2024 and sell it today you would earn a total of  4,138  from holding Egypt Aluminum or generate 35.18% return on investment over 90 days.

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

Egypt Aluminum  vs.  Zahraa Maadi Investment

Egypt Aluminum

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egypt Aluminum are ranked lower than 17 (%) 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.

Zahraa Maadi Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zahraa Maadi Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Egypt Aluminum and Zahraa Maadi

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

The idea behind Egypt Aluminum and Zahraa Maadi Investment 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.