Correlation Between Misr Oils and Misr Hotels
Can any of the company-specific risk be diversified away by investing in both Misr Oils and Misr Hotels 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 Oils and Misr Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Misr Oils Soap and Misr Hotels, you can compare the effects of market volatilities on Misr Oils and Misr Hotels 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 Oils with a short position of Misr Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Misr Oils and Misr Hotels.
Diversification Opportunities for Misr Oils and Misr Hotels
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Misr and Misr is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Misr Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr Hotels and Misr Oils 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 Oils Soap are associated (or correlated) with Misr Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr Hotels has no effect on the direction of Misr Oils i.e., Misr Oils and Misr Hotels go up and down completely randomly.
Pair Corralation between Misr Oils and Misr Hotels
Assuming the 90 days trading horizon Misr Oils is expected to generate 1.3 times less return on investment than Misr Hotels. But when comparing it to its historical volatility, Misr Oils Soap is 3.38 times less risky than Misr Hotels. It trades about 0.09 of its potential returns per unit of risk. Misr Hotels is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,709 in Misr Hotels on September 3, 2024 and sell it today you would lose (2,725) from holding Misr Hotels or give up 47.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Misr Oils Soap vs. Misr Hotels
Performance |
| Timeline |
| Misr Oils Soap |
| Misr Hotels |
Misr Oils and Misr Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Misr Oils and Misr Hotels
The main advantage of trading using opposite Misr Oils and Misr Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Misr Oils position performs unexpectedly, Misr Hotels 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 Misr Hotels will offset losses from the drop in Misr Hotels' long position.| Misr Oils vs. Saudi Egyptian Investment | Misr Oils vs. Assiut Islamic Trading | Misr Oils vs. Misr Financial Investments | Misr Oils vs. Al Arafa Investment |
| Misr Hotels vs. Paint Chemicals Industries | Misr Hotels vs. Egyptians For Investment | Misr Hotels vs. Misr Oils Soap | Misr Hotels 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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