Correlation Between Misr Chemical and Suez Canal

Can any of the company-specific risk be diversified away by investing in both Misr Chemical and Suez Canal 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 Suez Canal 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 Suez Canal Bank, you can compare the effects of market volatilities on Misr Chemical and Suez Canal 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 Suez Canal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Misr Chemical and Suez Canal.

Diversification Opportunities for Misr Chemical and Suez Canal

-0.19

Correlation Coefficient

Misr Chemical  Suez Canal

Good diversification

The 3 months correlation between Misr and Suez is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Misr Chemical Industries and Suez Canal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suez Canal Bank 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 Suez Canal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suez Canal Bank has no effect on the direction of Misr Chemical i.e., Misr Chemical and Suez Canal go up and down completely randomly.

Pair Corralation between Misr Chemical and Suez Canal

Assuming the 90 days trading horizon Misr Chemical is expected to generate 1.53 times less return on investment than Suez Canal. In addition to that, Misr Chemical is 1.06 times more volatile than Suez Canal Bank. It trades about 0.05 of its total potential returns per unit of risk. Suez Canal Bank is currently generating about 0.07 per unit of volatility. If you would invest  1,042  in Suez Canal Bank on September 18, 2024 and sell it today you would earn a total of  1,316  from holding Suez Canal Bank or generate 126.3% return on investment over 90 days.

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

Misr Chemical Industries  vs.  Suez Canal Bank

Misr Chemical Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Misr Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Suez Canal Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Suez Canal Bank are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Suez Canal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Misr Chemical and Suez Canal

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

The idea behind Misr Chemical Industries and Suez Canal Bank 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.