Correlation Between Edita Food and Egyptian Financial
Can any of the company-specific risk be diversified away by investing in both Edita Food and Egyptian Financial 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 Edita Food and Egyptian Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edita Food Industries and Egyptian Financial Industrial, you can compare the effects of market volatilities on Edita Food and Egyptian Financial 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 Edita Food with a short position of Egyptian Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edita Food and Egyptian Financial.
Diversification Opportunities for Edita Food and Egyptian Financial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Edita and Egyptian is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Edita Food Industries and Egyptian Financial Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Financial and Edita Food 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 Edita Food Industries are associated (or correlated) with Egyptian Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Financial has no effect on the direction of Edita Food i.e., Edita Food and Egyptian Financial go up and down completely randomly.
Pair Corralation between Edita Food and Egyptian Financial
Assuming the 90 days trading horizon Edita Food is expected to generate 35.68 times less return on investment than Egyptian Financial. But when comparing it to its historical volatility, Edita Food Industries is 1.43 times less risky than Egyptian Financial. It trades about 0.01 of its potential returns per unit of risk. Egyptian Financial Industrial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 6,270 in Egyptian Financial Industrial on September 4, 2024 and sell it today you would earn a total of 8,332 from holding Egyptian Financial Industrial or generate 132.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edita Food Industries vs. Egyptian Financial Industrial
Performance |
| Timeline |
| Edita Food Industries |
| Egyptian Financial |
Edita Food and Egyptian Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edita Food and Egyptian Financial
The main advantage of trading using opposite Edita Food and Egyptian Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edita Food position performs unexpectedly, Egyptian Financial 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 Financial will offset losses from the drop in Egyptian Financial's long position.| Edita Food vs. Misr Oils Soap | Edita Food vs. Egyptian Transport | Edita Food vs. Cairo For Investment | Edita Food vs. Al Arafa Investment |
| Egyptian Financial vs. Paint Chemicals Industries | Egyptian Financial vs. Egyptians For Investment | Egyptian Financial vs. Misr Oils Soap | Egyptian Financial vs. Global Telecom Holding |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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