Correlation Between Egyptian Iron and Arabia Investments
Can any of the company-specific risk be diversified away by investing in both Egyptian Iron and Arabia Investments 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 Iron and Arabia Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Egyptian Iron Steel and Arabia Investments Holding, you can compare the effects of market volatilities on Egyptian Iron and Arabia Investments 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 Iron with a short position of Arabia Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Iron and Arabia Investments.
Diversification Opportunities for Egyptian Iron and Arabia Investments
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Egyptian and Arabia is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Iron Steel and Arabia Investments Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arabia Investments and Egyptian Iron 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 Iron Steel are associated (or correlated) with Arabia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arabia Investments has no effect on the direction of Egyptian Iron i.e., Egyptian Iron and Arabia Investments go up and down completely randomly.
Pair Corralation between Egyptian Iron and Arabia Investments
Assuming the 90 days trading horizon Egyptian Iron Steel is expected to generate 1.42 times more return on investment than Arabia Investments. However, Egyptian Iron is 1.42 times more volatile than Arabia Investments Holding. It trades about 0.22 of its potential returns per unit of risk. Arabia Investments Holding is currently generating about -0.01 per unit of risk. If you would invest 1,535 in Egyptian Iron Steel on August 27, 2024 and sell it today you would earn a total of 3,442 from holding Egyptian Iron Steel or generate 224.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Egyptian Iron Steel vs. Arabia Investments Holding
Performance |
| Timeline |
| Egyptian Iron Steel |
| Arabia Investments |
Egyptian Iron and Arabia Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Egyptian Iron and Arabia Investments
The main advantage of trading using opposite Egyptian Iron and Arabia Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Egyptian Iron position performs unexpectedly, Arabia Investments 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 Arabia Investments will offset losses from the drop in Arabia Investments' long position.| Egyptian Iron vs. Paint Chemicals Industries | Egyptian Iron vs. Egyptians For Investment | Egyptian Iron vs. Misr Oils Soap | Egyptian Iron vs. Global Telecom Holding |
| Arabia Investments vs. Paint Chemicals Industries | Arabia Investments vs. Egyptians For Investment | Arabia Investments vs. Misr Oils Soap | Arabia Investments 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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