Correlation Between Export Development and Egyptian Transport

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

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

Diversification Opportunities for Export Development and Egyptian Transport

0.08

Correlation Coefficient

Export Development  Egyptian Transport

Significant diversification

The 3 months correlation between Export and Egyptian is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Export Development Bank and Egyptian Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Transport and Export Development 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 Export Development Bank are associated (or correlated) with Egyptian Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Transport has no effect on the direction of Export Development i.e., Export Development and Egyptian Transport go up and down completely randomly.

Pair Corralation between Export Development and Egyptian Transport

Assuming the 90 days trading horizon Export Development Bank is expected to generate 0.57 times more return on investment than Egyptian Transport. However, Export Development Bank is 1.76 times less risky than Egyptian Transport. It trades about 0.11 of its potential returns per unit of risk. Egyptian Transport is currently generating about 0.0 per unit of risk. If you would invest  1,738  in Export Development Bank on December 25, 2024 and sell it today you would earn a total of  166.00  from holding Export Development Bank or generate 9.55% return on investment over 90 days.

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

Export Development Bank  vs.  Egyptian Transport

Export Development Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Export Development Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Export Development may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Egyptian Transport

Risk-Adjusted Performance

Weak

Over the last 90 days Egyptian Transport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Egyptian Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Export Development and Egyptian Transport

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

The idea behind Export Development Bank and Egyptian Transport 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.