Correlation Between EGX 33 and Taaleem Management

Can any of the company-specific risk be diversified away by investing in both EGX 33 and Taaleem Management 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 Taaleem Management 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 Taaleem Management Services, you can compare the effects of market volatilities on EGX 33 and Taaleem Management 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 Taaleem Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of EGX 33 and Taaleem Management.

Diversification Opportunities for EGX 33 and Taaleem Management

-0.08

Correlation Coefficient

EGX 33  Taaleem Management

Good diversification

The 3 months correlation between EGX and Taaleem is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding EGX 33 Shariah and Taaleem Management Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taaleem Management 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 Taaleem Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taaleem Management has no effect on the direction of EGX 33 i.e., EGX 33 and Taaleem Management go up and down completely randomly.

Pair Corralation between EGX 33 and Taaleem Management

Assuming the 90 days trading horizon EGX 33 is expected to generate 1.63 times less return on investment than Taaleem Management. But when comparing it to its historical volatility, EGX 33 Shariah is 3.12 times less risky than Taaleem Management. It trades about 0.08 of its potential returns per unit of risk. Taaleem Management Services is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,090  in Taaleem Management Services on December 5, 2024 and sell it today you would earn a total of  42.00  from holding Taaleem Management Services or generate 3.85% return on investment over 90 days.

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

EGX 33 Shariah  vs.  Taaleem Management Services

Pair Trading with EGX 33 and Taaleem Management

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

The idea behind EGX 33 Shariah and Taaleem Management Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.