Correlation Between Reacap Financial and Orascom Investment

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

Diversification Opportunities for Reacap Financial and Orascom Investment

0.09

Correlation Coefficient

Reacap Financial  Orascom Investment

Significant diversification

The 3 months correlation between Reacap and Orascom is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Reacap Financial Investments and Orascom Investment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orascom Investment 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 Orascom Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orascom Investment has no effect on the direction of Reacap Financial i.e., Reacap Financial and Orascom Investment go up and down completely randomly.

Pair Corralation between Reacap Financial and Orascom Investment

Assuming the 90 days trading horizon Reacap Financial Investments is expected to under-perform the Orascom Investment. But the stock apears to be less risky and, when comparing its historical volatility, Reacap Financial Investments is 1.57 times less risky than Orascom Investment. The stock trades about -0.37 of its potential returns per unit of risk. The Orascom Investment Holding is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Orascom Investment Holding on September 19, 2024 and sell it today you would earn a total of  11.00  from holding Orascom Investment Holding or generate 24.44% return on investment over 90 days.

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

Reacap Financial Investments  vs.  Orascom Investment Holding

Reacap Financial Inv

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Reacap Financial Investments has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Orascom Investment

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orascom Investment Holding are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Orascom Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reacap Financial and Orascom Investment

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

The idea behind Reacap Financial Investments and Orascom Investment 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.