Correlation Between Egyptian Chemical and B Investments

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

Diversification Opportunities for Egyptian Chemical and B Investments

-0.33

Correlation Coefficient

Egyptian Chemical  B Investments

Very good diversification

The 3 months correlation between Egyptian and BINV is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Chemical Industries and B Investments Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Investments Holding 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 B Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Investments Holding has no effect on the direction of Egyptian Chemical i.e., Egyptian Chemical and B Investments go up and down completely randomly.

Pair Corralation between Egyptian Chemical and B Investments

Assuming the 90 days trading horizon Egyptian Chemical Industries is expected to generate 2.78 times more return on investment than B Investments. However, Egyptian Chemical is 2.78 times more volatile than B Investments Holding. It trades about 0.25 of its potential returns per unit of risk. B Investments Holding is currently generating about 0.04 per unit of risk. If you would invest  760.00  in Egyptian Chemical Industries on October 20, 2024 and sell it today you would earn a total of  78.00  from holding Egyptian Chemical Industries or generate 10.26% return on investment over 90 days.

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

Egyptian Chemical Industries  vs.  B Investments Holding

Egyptian Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Chemical Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Egyptian Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

B Investments Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B Investments Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, B Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Egyptian Chemical and B Investments

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

The idea behind Egyptian Chemical Industries and B Investments Holding 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.