Correlation Between Misr Oils and Medical Packaging

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

Diversification Opportunities for Misr Oils and Medical Packaging

0.33

Correlation Coefficient

Misr Oils  Medical Packaging

Weak diversification

The 3 months correlation between Misr and Medical is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Medical Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Packaging 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 Medical Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Packaging has no effect on the direction of Misr Oils i.e., Misr Oils and Medical Packaging go up and down completely randomly.

Pair Corralation between Misr Oils and Medical Packaging

Assuming the 90 days trading horizon Misr Oils Soap is expected to under-perform the Medical Packaging. But the stock apears to be less risky and, when comparing its historical volatility, Misr Oils Soap is 1.87 times less risky than Medical Packaging. The stock trades about -0.15 of its potential returns per unit of risk. The Medical Packaging is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  125.00  in Medical Packaging on December 4, 2024 and sell it today you would lose (7.00) from holding Medical Packaging or give up 5.6% of portfolio value over 90 days.

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

Misr Oils Soap  vs.  Medical Packaging

Misr Oils Soap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Misr Oils Soap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Medical Packaging

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Misr Oils Soap and Medical Packaging 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.