Correlation Between Nasdaq and Egyptian Chemical

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

By analyzing existing cross correlation between Nasdaq Inc and Egyptian Chemical Industries, you can compare the effects of market volatilities on Nasdaq and Egyptian Chemical 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 Nasdaq with a short position of Egyptian Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Egyptian Chemical.

Diversification Opportunities for Nasdaq and Egyptian Chemical

-0.26

Correlation Coefficient

Nasdaq  Egyptian Chemical

Very good diversification

The 3 months correlation between Nasdaq and Egyptian is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Egyptian Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Chemical and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Egyptian Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Chemical has no effect on the direction of Nasdaq i.e., Nasdaq and Egyptian Chemical go up and down completely randomly.

Pair Corralation between Nasdaq and Egyptian Chemical

Given the investment horizon of 90 days Nasdaq is expected to generate 2.07 times less return on investment than Egyptian Chemical. But when comparing it to its historical volatility, Nasdaq Inc is 2.82 times less risky than Egyptian Chemical. It trades about 0.05 of its potential returns per unit of risk. Egyptian Chemical Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  589.00  in Egyptian Chemical Industries on September 14, 2024 and sell it today you would earn a total of  191.00  from holding Egyptian Chemical Industries or generate 32.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.18%
Values	Daily Returns

Nasdaq Inc  vs.  Egyptian Chemical Industries

Nasdaq Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Egyptian Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Egyptian Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Nasdaq and Egyptian Chemical

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

The idea behind Nasdaq Inc and Egyptian Chemical Industries 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.