Correlation Between Ezz Steel and Misr Hotels

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

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

Diversification Opportunities for Ezz Steel and Misr Hotels

0.51

Correlation Coefficient

Ezz Steel  Misr Hotels

Very weak diversification

The 3 months correlation between Ezz and Misr is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ezz Steel and Misr Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr Hotels 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 Misr Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr Hotels has no effect on the direction of Ezz Steel i.e., Ezz Steel and Misr Hotels go up and down completely randomly.

Pair Corralation between Ezz Steel and Misr Hotels

Assuming the 90 days trading horizon Ezz Steel is expected to under-perform the Misr Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Ezz Steel is 1.55 times less risky than Misr Hotels. The stock trades about -0.04 of its potential returns per unit of risk. The Misr Hotels is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,442  in Misr Hotels on September 28, 2024 and sell it today you would earn a total of  392.00  from holding Misr Hotels or generate 16.05% return on investment over 90 days.

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

Ezz Steel  vs.  Misr Hotels

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.

Misr Hotels

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Hotels are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Misr Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ezz Steel and Misr Hotels

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

The idea behind Ezz Steel and Misr Hotels 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.