Correlation Between Misr Chemical and International Agricultural
Can any of the company-specific risk be diversified away by investing in both Misr Chemical and International Agricultural 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 Misr Chemical and International Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Misr Chemical Industries and International Agricultural Products, you can compare the effects of market volatilities on Misr Chemical and International Agricultural 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 Misr Chemical with a short position of International Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Misr Chemical and International Agricultural.
Diversification Opportunities for Misr Chemical and International Agricultural
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Misr and International is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Misr Chemical Industries and International Agricultural Pro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Agricultural and Misr 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 Misr Chemical Industries are associated (or correlated) with International Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Agricultural has no effect on the direction of Misr Chemical i.e., Misr Chemical and International Agricultural go up and down completely randomly.
Pair Corralation between Misr Chemical and International Agricultural
Assuming the 90 days trading horizon Misr Chemical is expected to generate 2.49 times less return on investment than International Agricultural. But when comparing it to its historical volatility, Misr Chemical Industries is 1.75 times less risky than International Agricultural. It trades about 0.05 of its potential returns per unit of risk. International Agricultural Products is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 749.00 in International Agricultural Products on September 4, 2024 and sell it today you would earn a total of 1,129 from holding International Agricultural Products or generate 150.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Misr Chemical Industries vs. International Agricultural Pro
Performance |
| Timeline |
| Misr Chemical Industries |
| International Agricultural |
Misr Chemical and International Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Misr Chemical and International Agricultural
The main advantage of trading using opposite Misr Chemical and International Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Misr Chemical position performs unexpectedly, International Agricultural 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 International Agricultural will offset losses from the drop in International Agricultural's long position.| Misr Chemical vs. Paint Chemicals Industries | Misr Chemical vs. Egyptians For Investment | Misr Chemical vs. Misr Oils Soap | Misr Chemical 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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