Correlation Between Ezz Steel and Natural Gas

Can any of the company-specific risk be diversified away by investing in both Ezz Steel and Natural Gas 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 Ezz Steel and Natural Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ezz Steel and Natural Gas Mining, you can compare the effects of market volatilities on Ezz Steel and Natural Gas 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 Ezz Steel with a short position of Natural Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ezz Steel and Natural Gas.

Diversification Opportunities for Ezz Steel and Natural Gas

-0.1

Correlation Coefficient

Ezz Steel  Natural Gas

Good diversification

The 3 months correlation between Ezz and Natural is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ezz Steel and Natural Gas Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Mining and Ezz Steel 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 Ezz Steel are associated (or correlated) with Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Mining has no effect on the direction of Ezz Steel i.e., Ezz Steel and Natural Gas go up and down completely randomly.

Pair Corralation between Ezz Steel and Natural Gas

Assuming the 90 days trading horizon Ezz Steel is expected to generate 0.61 times more return on investment than Natural Gas. However, Ezz Steel is 1.63 times less risky than Natural Gas. It trades about 0.31 of its potential returns per unit of risk. Natural Gas Mining is currently generating about 0.04 per unit of risk. If you would invest  10,999  in Ezz Steel on December 21, 2024 and sell it today you would earn a total of  2,391  from holding Ezz Steel or generate 21.74% return on investment over 90 days.

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

Ezz Steel  vs.  Natural Gas Mining

Ezz Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ezz Steel are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Ezz Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Natural Gas Mining

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Gas Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Natural Gas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ezz Steel and Natural Gas

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

The idea behind Ezz Steel and Natural Gas Mining 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.