Correlation Between Misr Oils and United Bank

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

Diversification Opportunities for Misr Oils and United Bank

0.06

Correlation Coefficient

Misr Oils  United Bank

Significant diversification

The 3 months correlation between Misr and United is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and The United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United 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 United Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bank has no effect on the direction of Misr Oils i.e., Misr Oils and United Bank go up and down completely randomly.

Pair Corralation between Misr Oils and United Bank

Assuming the 90 days trading horizon Misr Oils Soap is expected to under-perform the United Bank. In addition to that, Misr Oils is 1.53 times more volatile than The United Bank. It trades about -0.23 of its total potential returns per unit of risk. The United Bank is currently generating about 0.05 per unit of volatility. If you would invest  1,429  in The United Bank on October 5, 2024 and sell it today you would earn a total of  8.00  from holding The United Bank or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	82.35%
Values	Daily Returns

Misr Oils Soap  vs.  The United Bank

Misr Oils Soap

Risk-Adjusted Performance

0 of 100

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 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.

United Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The United Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, United Bank 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 United Bank

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

The idea behind Misr Oils Soap and The United 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.