Correlation Between Cairo Oils and Arab Aluminum
Can any of the company-specific risk be diversified away by investing in both Cairo Oils and Arab Aluminum 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 Cairo Oils and Arab Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cairo Oils Soap and Arab Aluminum, you can compare the effects of market volatilities on Cairo Oils and Arab Aluminum 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 Cairo Oils with a short position of Arab Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairo Oils and Arab Aluminum.
Diversification Opportunities for Cairo Oils and Arab Aluminum
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cairo and Arab is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Oils Soap and Arab Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arab Aluminum and Cairo Oils 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 Cairo Oils Soap are associated (or correlated) with Arab Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arab Aluminum has no effect on the direction of Cairo Oils i.e., Cairo Oils and Arab Aluminum go up and down completely randomly.
Pair Corralation between Cairo Oils and Arab Aluminum
Assuming the 90 days trading horizon Cairo Oils Soap is expected to generate 1.42 times more return on investment than Arab Aluminum. However, Cairo Oils is 1.42 times more volatile than Arab Aluminum. It trades about 0.09 of its potential returns per unit of risk. Arab Aluminum is currently generating about -0.05 per unit of risk. If you would invest 24.00 in Cairo Oils Soap on November 2, 2024 and sell it today you would earn a total of 3.00 from holding Cairo Oils Soap or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.04% |
| Values | Daily Returns |
Cairo Oils Soap vs. Arab Aluminum
Performance |
| Timeline |
| Cairo Oils Soap |
| Arab Aluminum |
Cairo Oils and Arab Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairo Oils and Arab Aluminum
The main advantage of trading using opposite Cairo Oils and Arab Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairo Oils position performs unexpectedly, Arab Aluminum 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 Arab Aluminum will offset losses from the drop in Arab Aluminum's long position.| Cairo Oils vs. Union National Bank | Cairo Oils vs. Faisal Islamic Bank | Cairo Oils vs. Export Development Bank | Cairo Oils vs. QALA For Financial |
| Arab Aluminum vs. Misr Financial Investments | Arab Aluminum vs. Reacap Financial Investments | Arab Aluminum vs. National Bank | Arab Aluminum vs. Saudi Egyptian 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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