Correlation Between Gadwa For and Egyptian Gulf

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

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

Diversification Opportunities for Gadwa For and Egyptian Gulf

0.63

Correlation Coefficient

Gadwa For  Egyptian Gulf

Poor diversification

The 3 months correlation between Gadwa and Egyptian is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Gadwa For Industrial and Egyptian Gulf Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Gulf Bank and Gadwa For 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 Gadwa For Industrial are associated (or correlated) with Egyptian Gulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Gulf Bank has no effect on the direction of Gadwa For i.e., Gadwa For and Egyptian Gulf go up and down completely randomly.

Pair Corralation between Gadwa For and Egyptian Gulf

Assuming the 90 days trading horizon Gadwa For Industrial is expected to under-perform the Egyptian Gulf. In addition to that, Gadwa For is 1.29 times more volatile than Egyptian Gulf Bank. It trades about -0.19 of its total potential returns per unit of risk. Egyptian Gulf Bank is currently generating about -0.09 per unit of volatility. If you would invest  29.00  in Egyptian Gulf Bank on October 11, 2024 and sell it today you would lose (2.00) from holding Egyptian Gulf Bank or give up 6.9% of portfolio value over 90 days.

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

Gadwa For Industrial  vs.  Egyptian Gulf Bank

Gadwa For Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gadwa For Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Egyptian Gulf Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Egyptian Gulf Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gadwa For and Egyptian Gulf

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

The idea behind Gadwa For Industrial and Egyptian Gulf Bank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.