Correlation Between Misr Oils and Arabia Investments

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

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

Diversification Opportunities for Misr Oils and Arabia Investments

-0.49

Correlation Coefficient

Misr Oils  Arabia Investments

Very good diversification

The 3 months correlation between Misr and Arabia is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Arabia Investments Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arabia Investments and Misr Oils 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 Oils Soap are associated (or correlated) with Arabia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arabia Investments has no effect on the direction of Misr Oils i.e., Misr Oils and Arabia Investments go up and down completely randomly.

Pair Corralation between Misr Oils and Arabia Investments

Assuming the 90 days trading horizon Misr Oils Soap is expected to under-perform the Arabia Investments. But the stock apears to be less risky and, when comparing its historical volatility, Misr Oils Soap is 1.84 times less risky than Arabia Investments. The stock trades about -0.12 of its potential returns per unit of risk. The Arabia Investments Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Arabia Investments Holding on September 15, 2024 and sell it today you would earn a total of  1.00  from holding Arabia Investments Holding or generate 1.89% return on investment over 90 days.

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

Misr Oils Soap  vs.  Arabia Investments Holding

Misr Oils Soap

Risk-Adjusted Performance

2 of 100

Weak

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

Arabia Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arabia Investments Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Arabia Investments 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 Oils and Arabia Investments

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

The idea behind Misr Oils Soap and Arabia Investments Holding 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.