Correlation Between Egyptian Transport and Sharkia National

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

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

Diversification Opportunities for Egyptian Transport and Sharkia National

0.9

Correlation Coefficient

Egyptian Transport  Sharkia National

Almost no diversification

The 3 months correlation between Egyptian and Sharkia is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Transport and Sharkia National Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharkia National Food 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 Sharkia National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharkia National Food has no effect on the direction of Egyptian Transport i.e., Egyptian Transport and Sharkia National go up and down completely randomly.

Pair Corralation between Egyptian Transport and Sharkia National

Assuming the 90 days trading horizon Egyptian Transport is expected to generate 2.66 times less return on investment than Sharkia National. In addition to that, Egyptian Transport is 1.06 times more volatile than Sharkia National Food. It trades about 0.22 of its total potential returns per unit of risk. Sharkia National Food is currently generating about 0.62 per unit of volatility. If you would invest  348.00  in Sharkia National Food on September 17, 2024 and sell it today you would earn a total of  210.00  from holding Sharkia National Food or generate 60.34% return on investment over 90 days.

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

Egyptian Transport  vs.  Sharkia National Food

Egyptian Transport

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Transport are ranked lower than 18 (%) 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.

Sharkia National Food

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sharkia National Food are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Sharkia National reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Egyptian Transport and Sharkia National

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

The idea behind Egyptian Transport and Sharkia National Food 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.