Correlation Between Egyptian Gulf and Act Financial

Can any of the company-specific risk be diversified away by investing in both Egyptian Gulf and Act Financial 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 Gulf and Act Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Egyptian Gulf and Act Financial

-0.19

Correlation Coefficient

Egyptian Gulf  Act Financial

Good diversification

The 3 months correlation between Egyptian and Act is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Gulf Bank and Act Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Act Financial and Egyptian Gulf 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 Gulf Bank are associated (or correlated) with Act Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Act Financial has no effect on the direction of Egyptian Gulf i.e., Egyptian Gulf and Act Financial go up and down completely randomly.

Pair Corralation between Egyptian Gulf and Act Financial

Assuming the 90 days trading horizon Egyptian Gulf Bank is expected to under-perform the Act Financial. But the stock apears to be less risky and, when comparing its historical volatility, Egyptian Gulf Bank is 1.96 times less risky than Act Financial. The stock trades about -0.08 of its potential returns per unit of risk. The Act Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  311.00  in Act Financial on October 9, 2024 and sell it today you would earn a total of  20.00  from holding Act Financial or generate 6.43% return on investment over 90 days.

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

Egyptian Gulf Bank  vs.  Act Financial

Egyptian Gulf Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Egyptian Gulf Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Act Financial

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Act Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Act Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Egyptian Gulf and Act Financial

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

The idea behind Egyptian Gulf Bank and Act Financial 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.