Correlation Between Egyptian Gulf and Reacap Financial

Can any of the company-specific risk be diversified away by investing in both Egyptian Gulf and Reacap 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 Reacap 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 Reacap Financial Investments, you can compare the effects of market volatilities on Egyptian Gulf and Reacap 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 Reacap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Gulf and Reacap Financial.

Diversification Opportunities for Egyptian Gulf and Reacap Financial

0.77

Correlation Coefficient

Egyptian Gulf  Reacap Financial

Poor diversification

The 3 months correlation between Egyptian and Reacap is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Gulf Bank and Reacap Financial Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reacap Financial Inv 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 Reacap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reacap Financial Inv has no effect on the direction of Egyptian Gulf i.e., Egyptian Gulf and Reacap Financial go up and down completely randomly.

Pair Corralation between Egyptian Gulf and Reacap Financial

Assuming the 90 days trading horizon Egyptian Gulf Bank is expected to generate 0.59 times more return on investment than Reacap Financial. However, Egyptian Gulf Bank is 1.71 times less risky than Reacap Financial. It trades about -0.05 of its potential returns per unit of risk. Reacap Financial Investments is currently generating about -0.05 per unit of risk. If you would invest  28.00  in Egyptian Gulf Bank on October 23, 2024 and sell it today you would lose (1.00) from holding Egyptian Gulf Bank or give up 3.57% of portfolio value over 90 days.

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

Egyptian Gulf Bank  vs.  Reacap Financial Investments

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 nearly stable technical and fundamental indicators, Egyptian Gulf is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Reacap Financial Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reacap Financial Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Egyptian Gulf and Reacap Financial

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

The idea behind Egyptian Gulf Bank and Reacap Financial Investments 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.