Correlation Between Orascom Construction and United Bank

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

Diversification Opportunities for Orascom Construction and United Bank

-0.61

Correlation Coefficient

Orascom Construction  United Bank

Excellent diversification

The 3 months correlation between Orascom and United is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Orascom Construction PLC and The United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United 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 United Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bank has no effect on the direction of Orascom Construction i.e., Orascom Construction and United Bank go up and down completely randomly.

Pair Corralation between Orascom Construction and United Bank

Assuming the 90 days trading horizon Orascom Construction PLC is expected to under-perform the United Bank. In addition to that, Orascom Construction is 4.2 times more volatile than The United Bank. It trades about -0.02 of its total potential returns per unit of risk. The United Bank is currently generating about -0.02 per unit of volatility. If you would invest  1,422  in The United Bank on December 24, 2024 and sell it today you would lose (5.00) from holding The United Bank or give up 0.35% of portfolio value over 90 days.

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

Orascom Construction PLC  vs.  The United 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.

United Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days The United Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, United Bank 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 United Bank

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

The idea behind Orascom Construction PLC and The United 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.