Correlation Between Ezz Steel and Iron

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

By analyzing existing cross correlation between Ezz Steel and Iron And Steel, you can compare the effects of market volatilities on Ezz Steel and Iron 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 Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ezz Steel and Iron.

Diversification Opportunities for Ezz Steel and Iron

-0.2

Correlation Coefficient

Ezz Steel  Iron

Good diversification

The 3 months correlation between Ezz and Iron is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ezz Steel and Iron And Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron And Steel 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 Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron And Steel has no effect on the direction of Ezz Steel i.e., Ezz Steel and Iron go up and down completely randomly.

Pair Corralation between Ezz Steel and Iron

Assuming the 90 days trading horizon Ezz Steel is expected to generate 1.44 times more return on investment than Iron. However, Ezz Steel is 1.44 times more volatile than Iron And Steel. It trades about 0.0 of its potential returns per unit of risk. Iron And Steel is currently generating about -0.05 per unit of risk. If you would invest  10,850  in Ezz Steel on September 5, 2024 and sell it today you would lose (384.00) from holding Ezz Steel or give up 3.54% of portfolio value over 90 days.

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

Ezz Steel  vs.  Iron And Steel

Ezz Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ezz Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ezz Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Iron And Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron And Steel 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.

Pair Trading with Ezz Steel and Iron

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

The idea behind Ezz Steel and Iron And Steel 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.