Correlation Between Egyptian Chemical and Act Financial

Can any of the company-specific risk be diversified away by investing in both Egyptian Chemical 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 Chemical 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 Chemical Industries and Act Financial, you can compare the effects of market volatilities on Egyptian Chemical 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 Chemical with a short position of Act Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Chemical and Act Financial.

Diversification Opportunities for Egyptian Chemical and Act Financial

0.0

Correlation Coefficient

Egyptian Chemical  Act Financial

Pay attention - limited upside

The 3 months correlation between Egyptian and Act is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Chemical Industries and Act Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Act Financial and Egyptian Chemical 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 Chemical Industries 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 Chemical i.e., Egyptian Chemical and Act Financial go up and down completely randomly.

Pair Corralation between Egyptian Chemical and Act Financial

Assuming the 90 days trading horizon Egyptian Chemical Industries is expected to generate 1.2 times more return on investment than Act Financial. However, Egyptian Chemical is 1.2 times more volatile than Act Financial. It trades about 0.02 of its potential returns per unit of risk. Act Financial is currently generating about -0.02 per unit of risk. If you would invest  773.00  in Egyptian Chemical Industries on October 7, 2024 and sell it today you would lose (44.00) from holding Egyptian Chemical Industries or give up 5.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	23.32%
Values	Daily Returns

Egyptian Chemical Industries  vs.  Act Financial

Egyptian Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Egyptian Chemical Industries 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Act Financial

Risk-Adjusted Performance

4 of 100

Insignificant

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 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Egyptian Chemical and Act Financial

The main advantage of trading using opposite Egyptian Chemical and Act Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Egyptian Chemical 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 Chemical Industries 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.