Correlation Between Egyptian Chemical and Edita Food

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

Diversification Opportunities for Egyptian Chemical and Edita Food

0.54

Correlation Coefficient

Egyptian Chemical  Edita Food

Very weak diversification

The 3 months correlation between Egyptian and Edita is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Chemical Industries and Edita Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edita Food Industries 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 Edita Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edita Food Industries has no effect on the direction of Egyptian Chemical i.e., Egyptian Chemical and Edita Food go up and down completely randomly.

Pair Corralation between Egyptian Chemical and Edita Food

Assuming the 90 days trading horizon Egyptian Chemical Industries is expected to generate 1.2 times more return on investment than Edita Food. However, Egyptian Chemical is 1.2 times more volatile than Edita Food Industries. It trades about 0.06 of its potential returns per unit of risk. Edita Food Industries is currently generating about -0.05 per unit of risk. If you would invest  809.00  in Egyptian Chemical Industries on October 22, 2024 and sell it today you would earn a total of  29.00  from holding Egyptian Chemical Industries or generate 3.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.97%
Values	Daily Returns

Egyptian Chemical Industries  vs.  Edita Food Industries

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 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.

Edita Food Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edita Food 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.

Pair Trading with Egyptian Chemical and Edita Food

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

The idea behind Egyptian Chemical Industries and Edita Food Industries 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.