Correlation Between Egyptian Media and Suez Canal

Can any of the company-specific risk be diversified away by investing in both Egyptian Media and Suez Canal 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 Egyptian Media and Suez Canal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Egyptian Media Production and Suez Canal Bank, you can compare the effects of market volatilities on Egyptian Media and Suez Canal 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 Egyptian Media with a short position of Suez Canal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Media and Suez Canal.

Diversification Opportunities for Egyptian Media and Suez Canal

0.24

Correlation Coefficient

Egyptian Media  Suez Canal

Modest diversification

The 3 months correlation between Egyptian and Suez is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Media Production and Suez Canal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suez Canal Bank and Egyptian Media 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 Egyptian Media Production are associated (or correlated) with Suez Canal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suez Canal Bank has no effect on the direction of Egyptian Media i.e., Egyptian Media and Suez Canal go up and down completely randomly.

Pair Corralation between Egyptian Media and Suez Canal

Assuming the 90 days trading horizon Egyptian Media Production is expected to under-perform the Suez Canal. But the stock apears to be less risky and, when comparing its historical volatility, Egyptian Media Production is 1.7 times less risky than Suez Canal. The stock trades about -0.03 of its potential returns per unit of risk. The Suez Canal Bank is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,285  in Suez Canal Bank on December 23, 2024 and sell it today you would lose (162.00) from holding Suez Canal Bank or give up 7.09% of portfolio value over 90 days.

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

Egyptian Media Production  vs.  Suez Canal Bank

Egyptian Media Production

Risk-Adjusted Performance

Very Weak

Over the last 90 days Egyptian Media Production has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Egyptian Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Suez Canal Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Suez Canal Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Suez Canal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Egyptian Media and Suez Canal

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

The idea behind Egyptian Media Production and Suez Canal 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.