Correlation Between Reacap Financial and Egyptian Transport

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

Diversification Opportunities for Reacap Financial and Egyptian Transport

0.32

Correlation Coefficient

Reacap Financial  Egyptian Transport

Weak diversification

The 3 months correlation between Reacap and Egyptian is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Reacap Financial Investments and Egyptian Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Transport 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 Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Transport has no effect on the direction of Reacap Financial i.e., Reacap Financial and Egyptian Transport go up and down completely randomly.

Pair Corralation between Reacap Financial and Egyptian Transport

Assuming the 90 days trading horizon Reacap Financial is expected to generate 3.07 times less return on investment than Egyptian Transport. But when comparing it to its historical volatility, Reacap Financial Investments is 1.09 times less risky than Egyptian Transport. It trades about 0.08 of its potential returns per unit of risk. Egyptian Transport is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  416.00  in Egyptian Transport on September 15, 2024 and sell it today you would earn a total of  188.00  from holding Egyptian Transport or generate 45.19% return on investment over 90 days.

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

Reacap Financial Investments  vs.  Egyptian Transport

Reacap Financial Inv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reacap Financial Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Reacap Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Egyptian Transport

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Transport are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reacap Financial and Egyptian Transport

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

The idea behind Reacap Financial Investments and Egyptian Transport 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.