Correlation Between Misr Chemical and Reacap Financial

Can any of the company-specific risk be diversified away by investing in both Misr Chemical and Reacap 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 Misr Chemical and Reacap Financial 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 Reacap Financial Investments, you can compare the effects of market volatilities on Misr Chemical and Reacap 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 Misr Chemical with a short position of Reacap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Misr Chemical and Reacap Financial.

Diversification Opportunities for Misr Chemical and Reacap Financial

0.61

Correlation Coefficient

Misr Chemical  Reacap Financial

Poor diversification

The 3 months correlation between Misr and Reacap is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Misr Chemical Industries and Reacap Financial Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reacap Financial Inv 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 Reacap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reacap Financial Inv has no effect on the direction of Misr Chemical i.e., Misr Chemical and Reacap Financial go up and down completely randomly.

Pair Corralation between Misr Chemical and Reacap Financial

Assuming the 90 days trading horizon Misr Chemical Industries is expected to under-perform the Reacap Financial. In addition to that, Misr Chemical is 1.18 times more volatile than Reacap Financial Investments. It trades about -0.08 of its total potential returns per unit of risk. Reacap Financial Investments is currently generating about -0.05 per unit of volatility. If you would invest  704.00  in Reacap Financial Investments on September 19, 2024 and sell it today you would lose (39.00) from holding Reacap Financial Investments or give up 5.54% of portfolio value over 90 days.

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

Misr Chemical Industries  vs.  Reacap Financial Investments

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.

Reacap Financial Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reacap Financial Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Reacap 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 Misr Chemical and Reacap Financial

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

The idea behind Misr Chemical Industries and Reacap Financial 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.