Correlation Between Egyptian Chemical and Egyptian Iron
Can any of the company-specific risk be diversified away by investing in both Egyptian Chemical and Egyptian Iron 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 Egyptian Iron 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 Egyptian Iron Steel, you can compare the effects of market volatilities on Egyptian Chemical and Egyptian Iron 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 Egyptian Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Chemical and Egyptian Iron.
Diversification Opportunities for Egyptian Chemical and Egyptian Iron
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Egyptian and Egyptian is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Chemical Industries and Egyptian Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Iron Steel 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 Egyptian Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Iron Steel has no effect on the direction of Egyptian Chemical i.e., Egyptian Chemical and Egyptian Iron go up and down completely randomly.
Pair Corralation between Egyptian Chemical and Egyptian Iron
Assuming the 90 days trading horizon Egyptian Chemical Industries is expected to under-perform the Egyptian Iron. But the stock apears to be less risky and, when comparing its historical volatility, Egyptian Chemical Industries is 4.27 times less risky than Egyptian Iron. The stock trades about -0.36 of its potential returns per unit of risk. The Egyptian Iron Steel is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest 3,525 in Egyptian Iron Steel on August 31, 2024 and sell it today you would earn a total of 1,634 from holding Egyptian Iron Steel or generate 46.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Egyptian Chemical Industries vs. Egyptian Iron Steel
Performance |
| Timeline |
| Egyptian Chemical |
| Egyptian Iron Steel |
Egyptian Chemical and Egyptian Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Egyptian Chemical and Egyptian Iron
The main advantage of trading using opposite Egyptian Chemical and Egyptian Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Egyptian Chemical position performs unexpectedly, Egyptian Iron 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 Iron will offset losses from the drop in Egyptian Iron's long position.| Egyptian Chemical vs. Paint Chemicals Industries | Egyptian Chemical vs. Reacap Financial Investments | Egyptian Chemical vs. Egyptians For Investment | Egyptian Chemical vs. Misr Oils Soap |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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