Correlation Between Nasdaq and Ezz Steel

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

By analyzing existing cross correlation between Nasdaq Inc and Ezz Steel, you can compare the effects of market volatilities on Nasdaq and Ezz Steel 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 Ezz Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Ezz Steel.

Diversification Opportunities for Nasdaq and Ezz Steel

0.47

Correlation Coefficient

Nasdaq  Ezz Steel

Very weak diversification

The 3 months correlation between Nasdaq and Ezz is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Ezz Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ezz Steel 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 Ezz Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ezz Steel has no effect on the direction of Nasdaq i.e., Nasdaq and Ezz Steel go up and down completely randomly.

Pair Corralation between Nasdaq and Ezz Steel

Given the investment horizon of 90 days Nasdaq is expected to generate 1.3 times less return on investment than Ezz Steel. But when comparing it to its historical volatility, Nasdaq Inc is 2.89 times less risky than Ezz Steel. It trades about 0.22 of its potential returns per unit of risk. Ezz Steel is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,041  in Ezz Steel on September 15, 2024 and sell it today you would earn a total of  2,561  from holding Ezz Steel or generate 31.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	78.57%
Values	Daily Returns

Nasdaq Inc  vs.  Ezz Steel

Nasdaq Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 11 (%) 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.

Ezz Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ezz Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Ezz Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nasdaq and Ezz Steel

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

The idea behind Nasdaq Inc and Ezz Steel 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.