Correlation Between Misr Oils and Al Baraka

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

Diversification Opportunities for Misr Oils and Al Baraka

0.74

Correlation Coefficient

Misr Oils  Al Baraka

Poor diversification

The 3 months correlation between Misr and SAUD is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Al Baraka Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Baraka Bank 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 Al Baraka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Baraka Bank has no effect on the direction of Misr Oils i.e., Misr Oils and Al Baraka go up and down completely randomly.

Pair Corralation between Misr Oils and Al Baraka

Assuming the 90 days trading horizon Misr Oils Soap is expected to generate 0.8 times more return on investment than Al Baraka. However, Misr Oils Soap is 1.25 times less risky than Al Baraka. It trades about -0.12 of its potential returns per unit of risk. Al Baraka Bank is currently generating about -0.16 per unit of risk. If you would invest  6,207  in Misr Oils Soap on September 16, 2024 and sell it today you would lose (193.00) from holding Misr Oils Soap or give up 3.11% 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.  Al Baraka Bank

Misr Oils Soap

Risk-Adjusted Performance

2 of 100

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.

Al Baraka Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Al Baraka Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Al Baraka reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Misr Oils and Al Baraka

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

The idea behind Misr Oils Soap and Al Baraka Bank 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.