Correlation Between Egyptian Iron and Misr National

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

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

Diversification Opportunities for Egyptian Iron and Misr National

0.59

Correlation Coefficient

Egyptian Iron  Misr National

Very weak diversification

The 3 months correlation between Egyptian and Misr is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Iron Steel and Misr National Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr National Steel and Egyptian Iron 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 Iron Steel are associated (or correlated) with Misr National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr National Steel has no effect on the direction of Egyptian Iron i.e., Egyptian Iron and Misr National go up and down completely randomly.

Pair Corralation between Egyptian Iron and Misr National

Assuming the 90 days trading horizon Egyptian Iron Steel is expected to generate 1.43 times more return on investment than Misr National. However, Egyptian Iron is 1.43 times more volatile than Misr National Steel. It trades about 0.17 of its potential returns per unit of risk. Misr National Steel is currently generating about 0.13 per unit of risk. If you would invest  3,691  in Egyptian Iron Steel on September 16, 2024 and sell it today you would earn a total of  1,393  from holding Egyptian Iron Steel or generate 37.74% return on investment over 90 days.

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

Egyptian Iron Steel  vs.  Misr National Steel

Egyptian Iron Steel

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Iron Steel are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Misr National Steel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Misr National Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Misr National reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Egyptian Iron and Misr National

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

The idea behind Egyptian Iron Steel and Misr National Steel 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.