Correlation Between Commercial International and B Investments
Can any of the company-specific risk be diversified away by investing in both Commercial International and B Investments 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 Commercial International and B Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commercial International Bank Egypt and B Investments Holding, you can compare the effects of market volatilities on Commercial International and B Investments 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 Commercial International with a short position of B Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial International and B Investments.
Diversification Opportunities for Commercial International and B Investments
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Commercial and BINV is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Commercial International Bank and B Investments Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Investments Holding and Commercial International 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 Commercial International Bank Egypt are associated (or correlated) with B Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Investments Holding has no effect on the direction of Commercial International i.e., Commercial International and B Investments go up and down completely randomly.
Pair Corralation between Commercial International and B Investments
Assuming the 90 days trading horizon Commercial International is expected to generate 4.92 times less return on investment than B Investments. But when comparing it to its historical volatility, Commercial International Bank Egypt is 1.26 times less risky than B Investments. It trades about 0.03 of its potential returns per unit of risk. B Investments Holding is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,437 in B Investments Holding on September 14, 2024 and sell it today you would earn a total of 84.00 from holding B Investments Holding or generate 3.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commercial International Bank vs. B Investments Holding
Performance |
| Timeline |
| Commercial International |
| B Investments Holding |
Commercial International and B Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commercial International and B Investments
The main advantage of trading using opposite Commercial International and B Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial International position performs unexpectedly, B Investments 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 B Investments will offset losses from the drop in B Investments' long position.The idea behind Commercial International Bank Egypt and B Investments 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.
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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