Correlation Between Medical Packaging and Egyptian Iron

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

Diversification Opportunities for Medical Packaging and Egyptian Iron

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between Medical and Egyptian is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Medical Packaging 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 Medical Packaging 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 Medical Packaging 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 Medical Packaging i.e., Medical Packaging and Egyptian Iron go up and down completely randomly.

Pair Corralation between Medical Packaging and Egyptian Iron

Assuming the 90 days trading horizon Medical Packaging is expected to generate 1.15 times more return on investment than Egyptian Iron. However, Medical Packaging is 1.15 times more volatile than Egyptian Iron Steel. It trades about 0.05 of its potential returns per unit of risk. Egyptian Iron Steel is currently generating about 0.0 per unit of risk. If you would invest  124.00  in Medical Packaging on October 12, 2024 and sell it today you would earn a total of  2.00  from holding Medical Packaging or generate 1.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy94.12%
ValuesDaily Returns

Medical Packaging  vs.  Egyptian Iron Steel

 Performance 
       Timeline  
Medical Packaging 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Medical Packaging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Medical Packaging is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Egyptian Iron Steel 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Iron Steel are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Medical Packaging and Egyptian Iron Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Medical Packaging and Egyptian Iron

The main advantage of trading using opposite Medical Packaging and Egyptian Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Packaging 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.
The idea behind Medical Packaging and Egyptian Iron Steel 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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