Correlation Between Misr Oils and Arabian Food

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

Diversification Opportunities for Misr Oils and Arabian Food

-0.1

Correlation Coefficient

Misr Oils  Arabian Food

Good diversification

The 3 months correlation between Misr and Arabian is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Arabian Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arabian Food Industries 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 Arabian Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arabian Food Industries has no effect on the direction of Misr Oils i.e., Misr Oils and Arabian Food go up and down completely randomly.

Pair Corralation between Misr Oils and Arabian Food

Assuming the 90 days trading horizon Misr Oils Soap is expected to generate 1.2 times more return on investment than Arabian Food. However, Misr Oils is 1.2 times more volatile than Arabian Food Industries. It trades about 0.09 of its potential returns per unit of risk. Arabian Food Industries is currently generating about -0.04 per unit of risk. If you would invest  5,896  in Misr Oils Soap on December 30, 2024 and sell it today you would earn a total of  475.00  from holding Misr Oils Soap or generate 8.06% 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.  Arabian Food Industries

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.

Arabian Food Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arabian Food Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Arabian Food 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 Arabian Food

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

The idea behind Misr Oils Soap and Arabian Food Industries 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.