Correlation Between Egyptian Gulf and Sharkia National

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

Diversification Opportunities for Egyptian Gulf and Sharkia National

-0.76

Correlation Coefficient

Egyptian Gulf  Sharkia National

Pay attention - limited upside

The 3 months correlation between Egyptian and Sharkia is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Gulf Bank and Sharkia National Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharkia National Food 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 Sharkia National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharkia National Food has no effect on the direction of Egyptian Gulf i.e., Egyptian Gulf and Sharkia National go up and down completely randomly.

Pair Corralation between Egyptian Gulf and Sharkia National

Assuming the 90 days trading horizon Egyptian Gulf is expected to generate 4.24 times less return on investment than Sharkia National. But when comparing it to its historical volatility, Egyptian Gulf Bank is 2.98 times less risky than Sharkia National. It trades about 0.25 of its potential returns per unit of risk. Sharkia National Food is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  534.00  in Sharkia National Food on October 24, 2024 and sell it today you would earn a total of  87.00  from holding Sharkia National Food or generate 16.29% return on investment over 90 days.

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

Egyptian Gulf Bank  vs.  Sharkia National Food

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.

Sharkia National Food

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sharkia National Food are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Sharkia National reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Egyptian Gulf and Sharkia National

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

The idea behind Egyptian Gulf Bank and Sharkia National Food 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.