Correlation Between Misr Oils and Ismailia National

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

Diversification Opportunities for Misr Oils and Ismailia National

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Misr and Ismailia is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Ismailia National Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ismailia National Food 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 Ismailia National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ismailia National Food has no effect on the direction of Misr Oils i.e., Misr Oils and Ismailia National go up and down completely randomly.

Pair Corralation between Misr Oils and Ismailia National

Assuming the 90 days trading horizon Misr Oils Soap is expected to under-perform the Ismailia National. But the stock apears to be less risky and, when comparing its historical volatility, Misr Oils Soap is 1.41 times less risky than Ismailia National. The stock trades about -0.14 of its potential returns per unit of risk. The Ismailia National Food is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,408  in Ismailia National Food on September 19, 2024 and sell it today you would earn a total of  0.00  from holding Ismailia National Food or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Misr Oils Soap  vs.  Ismailia National Food

 Performance 
       Timeline  
Misr Oils Soap 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
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.
Ismailia National Food 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Ismailia National Food are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ismailia National is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Misr Oils and Ismailia National Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Misr Oils and Ismailia National

The main advantage of trading using opposite Misr Oils and Ismailia National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Misr Oils position performs unexpectedly, Ismailia National 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 Ismailia National will offset losses from the drop in Ismailia National's long position.
The idea behind Misr Oils Soap and Ismailia National Food 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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