Correlation Between Orascom Construction and Egyptian Gulf

Can any of the company-specific risk be diversified away by investing in both Orascom Construction and Egyptian Gulf 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 Egyptian Gulf 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 Egyptian Gulf Bank, you can compare the effects of market volatilities on Orascom Construction and Egyptian Gulf 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 Egyptian Gulf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orascom Construction and Egyptian Gulf.

Diversification Opportunities for Orascom Construction and Egyptian Gulf

-0.46

Correlation Coefficient

Orascom Construction  Egyptian Gulf

Very good diversification

The 3 months correlation between Orascom and Egyptian is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Orascom Construction PLC and Egyptian Gulf Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Gulf Bank 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 Egyptian Gulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Gulf Bank has no effect on the direction of Orascom Construction i.e., Orascom Construction and Egyptian Gulf go up and down completely randomly.

Pair Corralation between Orascom Construction and Egyptian Gulf

Assuming the 90 days trading horizon Orascom Construction PLC is expected to generate 0.93 times more return on investment than Egyptian Gulf. However, Orascom Construction PLC is 1.07 times less risky than Egyptian Gulf. It trades about -0.02 of its potential returns per unit of risk. Egyptian Gulf Bank is currently generating about -0.04 per unit of risk. If you would invest  28,119  in Orascom Construction PLC on December 24, 2024 and sell it today you would lose (619.00) from holding Orascom Construction PLC or give up 2.2% of portfolio value over 90 days.

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

Orascom Construction PLC  vs.  Egyptian Gulf Bank

Orascom Construction PLC

Risk-Adjusted Performance

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.

Egyptian Gulf Bank

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Orascom Construction and Egyptian Gulf

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

The idea behind Orascom Construction PLC and Egyptian Gulf 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.