Correlation Between Egyptian Chemical and Faisal Islamic

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Can any of the company-specific risk be diversified away by investing in both Egyptian Chemical and Faisal Islamic 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 Egyptian Chemical and Faisal Islamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Egyptian Chemical Industries and Faisal Islamic Bank, you can compare the effects of market volatilities on Egyptian Chemical and Faisal Islamic 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 Egyptian Chemical with a short position of Faisal Islamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Chemical and Faisal Islamic.

Diversification Opportunities for Egyptian Chemical and Faisal Islamic

-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between Egyptian and Faisal is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Chemical Industries and Faisal Islamic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faisal Islamic Bank and Egyptian Chemical 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 Egyptian Chemical Industries are associated (or correlated) with Faisal Islamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faisal Islamic Bank has no effect on the direction of Egyptian Chemical i.e., Egyptian Chemical and Faisal Islamic go up and down completely randomly.

Pair Corralation between Egyptian Chemical and Faisal Islamic

Assuming the 90 days trading horizon Egyptian Chemical Industries is expected to generate 1.74 times more return on investment than Faisal Islamic. However, Egyptian Chemical is 1.74 times more volatile than Faisal Islamic Bank. It trades about 0.03 of its potential returns per unit of risk. Faisal Islamic Bank is currently generating about 0.05 per unit of risk. If you would invest  695.00  in Egyptian Chemical Industries on November 5, 2024 and sell it today you would earn a total of  108.00  from holding Egyptian Chemical Industries or generate 15.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Egyptian Chemical Industries  vs.  Faisal Islamic Bank

 Performance 
       Timeline  
Egyptian Chemical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Egyptian Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Egyptian Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Faisal Islamic Bank 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Faisal Islamic Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Faisal Islamic reported solid returns over the last few months and may actually be approaching a breakup point.

Egyptian Chemical and Faisal Islamic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Egyptian Chemical and Faisal Islamic

The main advantage of trading using opposite Egyptian Chemical and Faisal Islamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Egyptian Chemical position performs unexpectedly, Faisal Islamic 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 Faisal Islamic will offset losses from the drop in Faisal Islamic's long position.
The idea behind Egyptian Chemical Industries and Faisal Islamic Bank 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 CEOs Directory module to screen CEOs from public companies around the world.

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