Correlation Between Misr Oils and Misr Hotels

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

Diversification Opportunities for Misr Oils and Misr Hotels

0.5

Correlation Coefficient

Misr Oils  Misr Hotels

Very weak diversification

The 3 months correlation between Misr and Misr is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Misr Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr Hotels 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 Misr Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr Hotels has no effect on the direction of Misr Oils i.e., Misr Oils and Misr Hotels go up and down completely randomly.

Pair Corralation between Misr Oils and Misr Hotels

Assuming the 90 days trading horizon Misr Oils Soap is expected to under-perform the Misr Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Misr Oils Soap is 1.3 times less risky than Misr Hotels. The stock trades about -0.12 of its potential returns per unit of risk. The Misr Hotels is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,177  in Misr Hotels on September 17, 2024 and sell it today you would earn a total of  26.00  from holding Misr Hotels or generate 0.82% return on investment over 90 days.

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

Misr Oils Soap  vs.  Misr Hotels

Misr Oils Soap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Oils Soap are ranked lower than 3 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Misr Hotels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Hotels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Misr Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Misr Oils and Misr Hotels

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

The idea behind Misr Oils Soap and Misr Hotels 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.