Correlation Between Orascom Construction and Contact Financial

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

By analyzing existing cross correlation between Orascom Construction PLC and Contact Financial Holding, you can compare the effects of market volatilities on Orascom Construction and Contact Financial 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 Orascom Construction with a short position of Contact Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orascom Construction and Contact Financial.

Diversification Opportunities for Orascom Construction and Contact Financial

0.08

Correlation Coefficient

Orascom Construction  Contact Financial

Significant diversification

The 3 months correlation between Orascom and Contact is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Orascom Construction PLC and Contact Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contact Financial Holding and Orascom Construction 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 Orascom Construction PLC are associated (or correlated) with Contact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contact Financial Holding has no effect on the direction of Orascom Construction i.e., Orascom Construction and Contact Financial go up and down completely randomly.

Pair Corralation between Orascom Construction and Contact Financial

Assuming the 90 days trading horizon Orascom Construction is expected to generate 12.89 times less return on investment than Contact Financial. But when comparing it to its historical volatility, Orascom Construction PLC is 1.76 times less risky than Contact Financial. It trades about 0.01 of its potential returns per unit of risk. Contact Financial Holding is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  430.00  in Contact Financial Holding on October 11, 2024 and sell it today you would earn a total of  25.00  from holding Contact Financial Holding or generate 5.81% return on investment over 90 days.

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

Orascom Construction PLC  vs.  Contact Financial Holding

Orascom Construction PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Contact Financial Holding

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Orascom Construction and Contact Financial

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

The idea behind Orascom Construction PLC and Contact Financial Holding 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.