Correlation Between Egyptian Chemical and Telecom Egypt

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

Diversification Opportunities for Egyptian Chemical and Telecom Egypt

0.55

Correlation Coefficient

Egyptian Chemical  Telecom Egypt

Very weak diversification

The 3 months correlation between Egyptian and Telecom is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Chemical Industries and Telecom Egypt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Egypt 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 Telecom Egypt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Egypt has no effect on the direction of Egyptian Chemical i.e., Egyptian Chemical and Telecom Egypt go up and down completely randomly.

Pair Corralation between Egyptian Chemical and Telecom Egypt

Assuming the 90 days trading horizon Egyptian Chemical is expected to generate 7.46 times less return on investment than Telecom Egypt. In addition to that, Egyptian Chemical is 1.46 times more volatile than Telecom Egypt. It trades about 0.05 of its total potential returns per unit of risk. Telecom Egypt is currently generating about 0.57 per unit of volatility. If you would invest  3,325  in Telecom Egypt on December 5, 2024 and sell it today you would earn a total of  435.00  from holding Telecom Egypt or generate 13.08% return on investment over 90 days.

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

Egyptian Chemical Industries  vs.  Telecom Egypt

Egyptian Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Chemical Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Chemical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Telecom Egypt

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Egypt are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Telecom Egypt reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Egyptian Chemical and Telecom Egypt

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

The idea behind Egyptian Chemical Industries and Telecom Egypt 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.