Correlation Between Egyptian Transport and Edita Food

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

By analyzing existing cross correlation between Egyptian Transport and Edita Food Industries, you can compare the effects of market volatilities on Egyptian Transport and Edita Food 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 Egyptian Transport with a short position of Edita Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Transport and Edita Food.

Diversification Opportunities for Egyptian Transport and Edita Food

0.42

Correlation Coefficient

Egyptian Transport  Edita Food

Very weak diversification

The 3 months correlation between Egyptian and Edita is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Transport and Edita Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edita Food Industries and Egyptian Transport 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 Egyptian Transport are associated (or correlated) with Edita Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edita Food Industries has no effect on the direction of Egyptian Transport i.e., Egyptian Transport and Edita Food go up and down completely randomly.

Pair Corralation between Egyptian Transport and Edita Food

Assuming the 90 days trading horizon Egyptian Transport is expected to generate 2.08 times more return on investment than Edita Food. However, Egyptian Transport is 2.08 times more volatile than Edita Food Industries. It trades about 0.1 of its potential returns per unit of risk. Edita Food Industries is currently generating about 0.05 per unit of risk. If you would invest  502.00  in Egyptian Transport on December 30, 2024 and sell it today you would earn a total of  70.00  from holding Egyptian Transport or generate 13.94% return on investment over 90 days.

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

Egyptian Transport  vs.  Edita Food Industries

Egyptian Transport

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Transport are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Edita Food Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Edita Food Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Edita Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Egyptian Transport and Edita Food

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

The idea behind Egyptian Transport and Edita Food Industries 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.