Correlation Between Egyptian Chemical and Misr Oils

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

Diversification Opportunities for Egyptian Chemical and Misr Oils

-0.42

Correlation Coefficient

Egyptian Chemical  Misr Oils

Very good diversification

The 3 months correlation between Egyptian and Misr is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Chemical Industries and Misr Oils Soap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr Oils Soap 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 Misr Oils. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr Oils Soap has no effect on the direction of Egyptian Chemical i.e., Egyptian Chemical and Misr Oils go up and down completely randomly.

Pair Corralation between Egyptian Chemical and Misr Oils

Assuming the 90 days trading horizon Egyptian Chemical Industries is expected to generate 1.04 times more return on investment than Misr Oils. However, Egyptian Chemical is 1.04 times more volatile than Misr Oils Soap. It trades about 0.17 of its potential returns per unit of risk. Misr Oils Soap is currently generating about 0.09 per unit of risk. If you would invest  689.00  in Egyptian Chemical Industries on December 30, 2024 and sell it today you would earn a total of  116.00  from holding Egyptian Chemical Industries or generate 16.84% return on investment over 90 days.

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

Egyptian Chemical Industries  vs.  Misr Oils Soap

Egyptian Chemical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Chemical Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Chemical reported solid returns over the last few months and may actually be approaching a breakup point.

Misr Oils Soap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Oils Soap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Misr Oils may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Egyptian Chemical and Misr Oils

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

The idea behind Egyptian Chemical Industries and Misr Oils Soap 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.