Correlation Between Iron and Orascom Construction

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

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

Diversification Opportunities for Iron and Orascom Construction

-0.68

Correlation Coefficient

Iron  Orascom Construction

Excellent diversification

The 3 months correlation between Iron and Orascom is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Iron And Steel and Orascom Construction PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orascom Construction PLC and 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 Iron And Steel are associated (or correlated) with Orascom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orascom Construction PLC has no effect on the direction of Iron i.e., Iron and Orascom Construction go up and down completely randomly.

Pair Corralation between Iron and Orascom Construction

Assuming the 90 days trading horizon Iron And Steel is expected to generate 2.25 times more return on investment than Orascom Construction. However, Iron is 2.25 times more volatile than Orascom Construction PLC. It trades about -0.12 of its potential returns per unit of risk. Orascom Construction PLC is currently generating about -0.37 per unit of risk. If you would invest  444.00  in Iron And Steel on September 15, 2024 and sell it today you would lose (19.00) from holding Iron And Steel or give up 4.28% of portfolio value over 90 days.

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

Iron And Steel  vs.  Orascom Construction PLC

Iron And Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron And Steel 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.

Orascom Construction PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orascom Construction PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Orascom Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron and Orascom Construction

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

The idea behind Iron And Steel and Orascom Construction PLC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.