Correlation Between EGX 33 and Export Development

Can any of the company-specific risk be diversified away by investing in both EGX 33 and Export Development 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 EGX 33 and Export Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EGX 33 Shariah and Export Development Bank, you can compare the effects of market volatilities on EGX 33 and Export Development 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 EGX 33 with a short position of Export Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of EGX 33 and Export Development.

Diversification Opportunities for EGX 33 and Export Development

0.54

Correlation Coefficient

EGX 33  Export Development

Very weak diversification

The 3 months correlation between EGX and Export is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding EGX 33 Shariah and Export Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Export Development Bank and EGX 33 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 EGX 33 Shariah are associated (or correlated) with Export Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Export Development Bank has no effect on the direction of EGX 33 i.e., EGX 33 and Export Development go up and down completely randomly.

Pair Corralation between EGX 33 and Export Development

Assuming the 90 days trading horizon EGX 33 is expected to generate 1.03 times less return on investment than Export Development. But when comparing it to its historical volatility, EGX 33 Shariah is 2.9 times less risky than Export Development. It trades about 0.13 of its potential returns per unit of risk. Export Development Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,204  in Export Development Bank on September 28, 2024 and sell it today you would earn a total of  544.00  from holding Export Development Bank or generate 45.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	27.98%
Values	Daily Returns

EGX 33 Shariah  vs.  Export Development Bank

Pair Trading with EGX 33 and Export Development

The main advantage of trading using opposite EGX 33 and Export Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EGX 33 position performs unexpectedly, Export Development 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 Export Development will offset losses from the drop in Export Development's long position.

The idea behind EGX 33 Shariah and Export Development 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..