Correlation Between Ezz Steel and Mohandes Insurance

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

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

Diversification Opportunities for Ezz Steel and Mohandes Insurance

0.29

Correlation Coefficient

Ezz Steel  Mohandes Insurance

Modest diversification

The 3 months correlation between Ezz and Mohandes is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ezz Steel and Mohandes Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mohandes Insurance 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 Mohandes Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mohandes Insurance has no effect on the direction of Ezz Steel i.e., Ezz Steel and Mohandes Insurance go up and down completely randomly.

Pair Corralation between Ezz Steel and Mohandes Insurance

Assuming the 90 days trading horizon Ezz Steel is expected to under-perform the Mohandes Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Ezz Steel is 1.11 times less risky than Mohandes Insurance. The stock trades about -0.04 of its potential returns per unit of risk. The Mohandes Insurance is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,029  in Mohandes Insurance on September 28, 2024 and sell it today you would earn a total of  333.00  from holding Mohandes Insurance or generate 16.41% return on investment over 90 days.

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

Ezz Steel  vs.  Mohandes Insurance

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.

Mohandes Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mohandes Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Mohandes Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ezz Steel and Mohandes Insurance

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

The idea behind Ezz Steel and Mohandes Insurance 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.