Correlation Between Reacap Financial and Egyptian Financial

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

By analyzing existing cross correlation between Reacap Financial Investments and Egyptian Financial Industrial, you can compare the effects of market volatilities on Reacap Financial and Egyptian 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 Reacap Financial with a short position of Egyptian Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reacap Financial and Egyptian Financial.

Diversification Opportunities for Reacap Financial and Egyptian Financial

0.84

Correlation Coefficient

Reacap Financial  Egyptian Financial

Very poor diversification

The 3 months correlation between Reacap and Egyptian is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Reacap Financial Investments and Egyptian Financial Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Financial and Reacap Financial 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 Reacap Financial Investments are associated (or correlated) with Egyptian Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Financial has no effect on the direction of Reacap Financial i.e., Reacap Financial and Egyptian Financial go up and down completely randomly.

Pair Corralation between Reacap Financial and Egyptian Financial

Assuming the 90 days trading horizon Reacap Financial is expected to generate 9.28 times less return on investment than Egyptian Financial. But when comparing it to its historical volatility, Reacap Financial Investments is 1.11 times less risky than Egyptian Financial. It trades about 0.03 of its potential returns per unit of risk. Egyptian Financial Industrial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  10,350  in Egyptian Financial Industrial on September 17, 2024 and sell it today you would earn a total of  4,750  from holding Egyptian Financial Industrial or generate 45.89% return on investment over 90 days.

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

Reacap Financial Investments  vs.  Egyptian Financial Industrial

Reacap Financial Inv

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reacap Financial Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Reacap Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Egyptian Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Financial Industrial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reacap Financial and Egyptian Financial

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

The idea behind Reacap Financial Investments and Egyptian Financial Industrial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.