Correlation Between National Drilling and Ezz Steel

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

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

Diversification Opportunities for National Drilling and Ezz Steel

0.0

Correlation Coefficient

National Drilling  Ezz Steel

Pay attention - limited upside

The 3 months correlation between National and Ezz is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding National Drilling and Ezz Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ezz Steel and National Drilling 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 National Drilling 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 National Drilling i.e., National Drilling and Ezz Steel go up and down completely randomly.

Pair Corralation between National Drilling and Ezz Steel

If you would invest  10,700  in Ezz Steel on October 26, 2024 and sell it today you would earn a total of  2,203  from holding Ezz Steel or generate 20.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

National Drilling  vs.  Ezz Steel

National Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ezz Steel

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with National Drilling and Ezz Steel

The main advantage of trading using opposite National Drilling and Ezz Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Drilling 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 National Drilling 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.