Correlation Between Misr Oils and Egyptian Media

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

Diversification Opportunities for Misr Oils and Egyptian Media

0.63

Correlation Coefficient

Misr Oils  Egyptian Media

Poor diversification

The 3 months correlation between Misr and Egyptian is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Egyptian Media Production in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Media Production 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 Egyptian Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Media Production has no effect on the direction of Misr Oils i.e., Misr Oils and Egyptian Media go up and down completely randomly.

Pair Corralation between Misr Oils and Egyptian Media

Assuming the 90 days trading horizon Misr Oils Soap is expected to generate 0.67 times more return on investment than Egyptian Media. However, Misr Oils Soap is 1.49 times less risky than Egyptian Media. It trades about -0.09 of its potential returns per unit of risk. Egyptian Media Production is currently generating about -0.27 per unit of risk. If you would invest  5,997  in Misr Oils Soap on September 21, 2024 and sell it today you would lose (130.00) from holding Misr Oils Soap or give up 2.17% of portfolio value over 90 days.

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

Misr Oils Soap  vs.  Egyptian Media Production

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Egyptian Media Production

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Media Production are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Misr Oils and Egyptian Media

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

The idea behind Misr Oils Soap and Egyptian Media Production 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.