Correlation Between Misr Chemical and Arab Moltaka

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

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

Diversification Opportunities for Misr Chemical and Arab Moltaka

0.25

Correlation Coefficient

Misr Chemical  Arab Moltaka

Modest diversification

The 3 months correlation between Misr and Arab is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Misr Chemical Industries and Arab Moltaka Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arab Moltaka Investments and Misr Chemical 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 Chemical Industries are associated (or correlated) with Arab Moltaka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arab Moltaka Investments has no effect on the direction of Misr Chemical i.e., Misr Chemical and Arab Moltaka go up and down completely randomly.

Pair Corralation between Misr Chemical and Arab Moltaka

Assuming the 90 days trading horizon Misr Chemical is expected to generate 5.3 times less return on investment than Arab Moltaka. But when comparing it to its historical volatility, Misr Chemical Industries is 1.6 times less risky than Arab Moltaka. It trades about 0.04 of its potential returns per unit of risk. Arab Moltaka Investments is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  236.00  in Arab Moltaka Investments on December 29, 2024 and sell it today you would earn a total of  39.00  from holding Arab Moltaka Investments or generate 16.53% return on investment over 90 days.

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

Misr Chemical Industries  vs.  Arab Moltaka Investments

Misr Chemical Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Chemical Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Misr Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Arab Moltaka Investments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arab Moltaka Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arab Moltaka reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Misr Chemical and Arab Moltaka

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

The idea behind Misr Chemical Industries and Arab Moltaka Investments 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.