Correlation Between Misr Hotels and Mohandes Insurance

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

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

Diversification Opportunities for Misr Hotels and Mohandes Insurance

0.6

Correlation Coefficient

Misr Hotels  Mohandes Insurance

Poor diversification

The 3 months correlation between Misr and Mohandes is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Misr Hotels and Mohandes Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mohandes Insurance and Misr Hotels 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 Misr Hotels are associated (or correlated) with Mohandes Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mohandes Insurance has no effect on the direction of Misr Hotels i.e., Misr Hotels and Mohandes Insurance go up and down completely randomly.

Pair Corralation between Misr Hotels and Mohandes Insurance

Assuming the 90 days trading horizon Misr Hotels is expected to generate 2.12 times more return on investment than Mohandes Insurance. However, Misr Hotels is 2.12 times more volatile than Mohandes Insurance. It trades about 0.03 of its potential returns per unit of risk. Mohandes Insurance is currently generating about 0.05 per unit of risk. If you would invest  5,922  in Misr Hotels on September 28, 2024 and sell it today you would lose (3,088) from holding Misr Hotels or give up 52.14% of portfolio value over 90 days.

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

Misr Hotels  vs.  Mohandes Insurance

Misr Hotels

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Hotels are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Misr Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Mohandes Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mohandes Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Mohandes Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Misr Hotels and Mohandes Insurance

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

The idea behind Misr Hotels and Mohandes Insurance 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.