Correlation Between Orascom Construction and Iron
Can any of the company-specific risk be diversified away by investing in both Orascom Construction and 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 Orascom Construction and Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orascom Construction PLC and Iron And Steel, you can compare the effects of market volatilities on Orascom Construction and 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 Orascom Construction with a short position of Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orascom Construction and Iron.
Diversification Opportunities for Orascom Construction and Iron
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Orascom and Iron is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Orascom Construction PLC and Iron And Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron And Steel and Orascom Construction 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 Orascom Construction PLC are associated (or correlated) with Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron And Steel has no effect on the direction of Orascom Construction i.e., Orascom Construction and Iron go up and down completely randomly.
Pair Corralation between Orascom Construction and Iron
Assuming the 90 days trading horizon Orascom Construction is expected to generate 2.81 times less return on investment than Iron. But when comparing it to its historical volatility, Orascom Construction PLC is 3.49 times less risky than Iron. It trades about 0.11 of its potential returns per unit of risk. Iron And Steel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 394.00 in Iron And Steel on November 29, 2024 and sell it today you would earn a total of 17.00 from holding Iron And Steel or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orascom Construction PLC vs. Iron And Steel
Performance |
| Timeline |
| Orascom Construction PLC |
| Iron And Steel |
Orascom Construction and Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orascom Construction and Iron
The main advantage of trading using opposite Orascom Construction and Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orascom Construction position performs unexpectedly, 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 Iron will offset losses from the drop in Iron's long position.The idea behind Orascom Construction PLC and Iron And 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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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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