Correlation Between Egypt Aluminum and Ezz Steel
Can any of the company-specific risk be diversified away by investing in both Egypt Aluminum and Ezz Steel 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 Egypt Aluminum and Ezz Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Egypt Aluminum and Ezz Steel, you can compare the effects of market volatilities on Egypt Aluminum and Ezz Steel 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 Egypt Aluminum with a short position of Ezz Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egypt Aluminum and Ezz Steel.
Diversification Opportunities for Egypt Aluminum and Ezz Steel
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Egypt and Ezz is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Egypt Aluminum and Ezz Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ezz Steel and Egypt Aluminum 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 Egypt Aluminum are associated (or correlated) with Ezz Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ezz Steel has no effect on the direction of Egypt Aluminum i.e., Egypt Aluminum and Ezz Steel go up and down completely randomly.
Pair Corralation between Egypt Aluminum and Ezz Steel
Assuming the 90 days trading horizon Egypt Aluminum is expected to generate 1.52 times less return on investment than Ezz Steel. But when comparing it to its historical volatility, Egypt Aluminum is 1.47 times less risky than Ezz Steel. It trades about 0.1 of its potential returns per unit of risk. Ezz Steel is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 8,041 in Ezz Steel on September 12, 2024 and sell it today you would earn a total of 2,614 from holding Ezz Steel or generate 32.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Egypt Aluminum vs. Ezz Steel
Performance |
| Timeline |
| Egypt Aluminum |
| Ezz Steel |
Egypt Aluminum and Ezz Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Egypt Aluminum and Ezz Steel
The main advantage of trading using opposite Egypt Aluminum and Ezz Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Egypt Aluminum position performs unexpectedly, Ezz Steel 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 Ezz Steel will offset losses from the drop in Ezz Steel's long position.| Egypt Aluminum vs. Paint Chemicals Industries | Egypt Aluminum vs. Reacap Financial Investments | Egypt Aluminum vs. Egyptians For Investment | Egypt Aluminum vs. Misr Oils Soap |
| Ezz Steel vs. Paint Chemicals Industries | Ezz Steel vs. Reacap Financial Investments | Ezz Steel vs. Egyptians For Investment | Ezz Steel vs. Misr Oils Soap |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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