Correlation Between Egyptian Chemical and Zahraa Maadi

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

Diversification Opportunities for Egyptian Chemical and Zahraa Maadi

0.13

Correlation Coefficient

Egyptian Chemical  Zahraa Maadi

Average diversification

The 3 months correlation between Egyptian and Zahraa is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Chemical Industries and Zahraa Maadi Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zahraa Maadi Investment 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 Zahraa Maadi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zahraa Maadi Investment has no effect on the direction of Egyptian Chemical i.e., Egyptian Chemical and Zahraa Maadi go up and down completely randomly.

Pair Corralation between Egyptian Chemical and Zahraa Maadi

Assuming the 90 days trading horizon Egyptian Chemical Industries is expected to under-perform the Zahraa Maadi. But the stock apears to be less risky and, when comparing its historical volatility, Egyptian Chemical Industries is 1.47 times less risky than Zahraa Maadi. The stock trades about -0.11 of its potential returns per unit of risk. The Zahraa Maadi Investment is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  705.00  in Zahraa Maadi Investment on September 16, 2024 and sell it today you would earn a total of  13.00  from holding Zahraa Maadi Investment or generate 1.84% return on investment over 90 days.

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

Egyptian Chemical Industries  vs.  Zahraa Maadi Investment

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 latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Zahraa Maadi Investment

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Egyptian Chemical and Zahraa Maadi

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

The idea behind Egyptian Chemical Industries and Zahraa Maadi Investment 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.