Correlation Between Egyptian Iron and Orascom Financial
Can any of the company-specific risk be diversified away by investing in both Egyptian Iron and Orascom 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 Egyptian Iron and Orascom Financial 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 Orascom Financial Holding, you can compare the effects of market volatilities on Egyptian Iron and Orascom 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 Egyptian Iron with a short position of Orascom Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Iron and Orascom Financial.
Diversification Opportunities for Egyptian Iron and Orascom Financial
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Egyptian and Orascom is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Iron Steel and Orascom Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orascom Financial Holding 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 Orascom Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orascom Financial Holding has no effect on the direction of Egyptian Iron i.e., Egyptian Iron and Orascom Financial go up and down completely randomly.
Pair Corralation between Egyptian Iron and Orascom Financial
Assuming the 90 days trading horizon Egyptian Iron Steel is expected to under-perform the Orascom Financial. But the stock apears to be less risky and, when comparing its historical volatility, Egyptian Iron Steel is 1.01 times less risky than Orascom Financial. The stock trades about -0.16 of its potential returns per unit of risk. The Orascom Financial Holding is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 38.00 in Orascom Financial Holding on September 24, 2024 and sell it today you would lose (1.00) from holding Orascom Financial Holding or give up 2.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Egyptian Iron Steel vs. Orascom Financial Holding
Performance |
| Timeline |
| Egyptian Iron Steel |
| Orascom Financial Holding |
Egyptian Iron and Orascom Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Egyptian Iron and Orascom Financial
The main advantage of trading using opposite Egyptian Iron and Orascom Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Egyptian Iron position performs unexpectedly, Orascom 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 Orascom Financial will offset losses from the drop in Orascom Financial's long position.| Egyptian Iron vs. Memphis Pharmaceuticals | Egyptian Iron vs. Paint Chemicals Industries | Egyptian Iron vs. Egyptians For Investment | Egyptian Iron vs. Global Telecom Holding |
| Orascom Financial vs. Memphis Pharmaceuticals | Orascom Financial vs. Paint Chemicals Industries | Orascom Financial vs. Egyptians For Investment | Orascom 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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