Correlation Between Ezz Steel and Speed Medical

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

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

Diversification Opportunities for Ezz Steel and Speed Medical

0.57

Correlation Coefficient

Ezz Steel  Speed Medical

Very weak diversification

The 3 months correlation between Ezz and Speed is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ezz Steel and Speed Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Speed Medical 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 Speed Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Speed Medical has no effect on the direction of Ezz Steel i.e., Ezz Steel and Speed Medical go up and down completely randomly.

Pair Corralation between Ezz Steel and Speed Medical

Assuming the 90 days trading horizon Ezz Steel is expected to generate 1.48 times more return on investment than Speed Medical. However, Ezz Steel is 1.48 times more volatile than Speed Medical. It trades about 0.06 of its potential returns per unit of risk. Speed Medical is currently generating about 0.03 per unit of risk. If you would invest  9,920  in Ezz Steel on September 17, 2024 and sell it today you would earn a total of  682.00  from holding Ezz Steel or generate 6.88% 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.  Speed Medical

Ezz Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ezz Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Ezz Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Speed Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Speed Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Speed Medical 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 Speed Medical

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

The idea behind Ezz Steel and Speed Medical 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.