Correlation Between Al Khair and Egyptian Financial

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

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

Diversification Opportunities for Al Khair and Egyptian Financial

-0.05

Correlation Coefficient

Al Khair  Egyptian Financial

Good diversification

The 3 months correlation between KRDI and Egyptian is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Al Khair River and Egyptian Financial Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Financial and Al Khair 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 Al Khair River are associated (or correlated) with Egyptian Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Financial has no effect on the direction of Al Khair i.e., Al Khair and Egyptian Financial go up and down completely randomly.

Pair Corralation between Al Khair and Egyptian Financial

Assuming the 90 days trading horizon Al Khair River is expected to generate 1.49 times more return on investment than Egyptian Financial. However, Al Khair is 1.49 times more volatile than Egyptian Financial Industrial. It trades about 0.04 of its potential returns per unit of risk. Egyptian Financial Industrial is currently generating about 0.0 per unit of risk. If you would invest  57.00  in Al Khair River on December 22, 2024 and sell it today you would earn a total of  2.00  from holding Al Khair River or generate 3.51% return on investment over 90 days.

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

Al Khair River  vs.  Egyptian Financial Industrial

Al Khair River

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair River are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Al Khair is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Egyptian Financial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Al Khair and Egyptian Financial

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

The idea behind Al Khair River and Egyptian Financial Industrial 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.