Correlation Between Misr Oils and Cairo Oils

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

Diversification Opportunities for Misr Oils and Cairo Oils

-0.21

Correlation Coefficient

Misr Oils  Cairo Oils

Very good diversification

The 3 months correlation between Misr and Cairo is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Cairo Oils Soap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairo Oils Soap 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 Cairo Oils. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairo Oils Soap has no effect on the direction of Misr Oils i.e., Misr Oils and Cairo Oils go up and down completely randomly.

Pair Corralation between Misr Oils and Cairo Oils

Assuming the 90 days trading horizon Misr Oils is expected to generate 4.89 times less return on investment than Cairo Oils. But when comparing it to its historical volatility, Misr Oils Soap is 2.89 times less risky than Cairo Oils. It trades about 0.09 of its potential returns per unit of risk. Cairo Oils Soap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Cairo Oils Soap on December 27, 2024 and sell it today you would earn a total of  10.00  from holding Cairo Oils Soap or generate 41.67% return on investment over 90 days.

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

Misr Oils Soap  vs.  Cairo Oils Soap

Misr Oils Soap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Oils Soap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Misr Oils may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cairo Oils Soap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Oils Soap are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Cairo Oils reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Misr Oils and Cairo Oils

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

The idea behind Misr Oils Soap and Cairo Oils Soap 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 Transaction History module to view history of all your transactions and understand their impact on performance.