Correlation Between Speed Medical and Egyptian Transport

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

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

Diversification Opportunities for Speed Medical and Egyptian Transport

0.21

Correlation Coefficient

Speed Medical  Egyptian Transport

Modest diversification

The 3 months correlation between Speed and Egyptian is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Speed Medical and Egyptian Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Transport and Speed Medical 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 Speed Medical 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 Speed Medical i.e., Speed Medical and Egyptian Transport go up and down completely randomly.

Pair Corralation between Speed Medical and Egyptian Transport

Assuming the 90 days trading horizon Speed Medical is expected to generate 3.55 times less return on investment than Egyptian Transport. But when comparing it to its historical volatility, Speed Medical is 1.64 times less risky than Egyptian Transport. It trades about 0.15 of its potential returns per unit of risk. Egyptian Transport is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  404.00  in Egyptian Transport on September 16, 2024 and sell it today you would earn a total of  200.00  from holding Egyptian Transport or generate 49.5% return on investment over 90 days.

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

Speed Medical  vs.  Egyptian Transport

Speed Medical

Risk-Adjusted Performance

2 of 100

Weak

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

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 Speed Medical and Egyptian Transport

The main advantage of trading using opposite Speed Medical and Egyptian Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Speed Medical 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 Speed Medical 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.