Correlation Between Suez Canal and Medical Packaging

Can any of the company-specific risk be diversified away by investing in both Suez Canal and Medical Packaging 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 Suez Canal and Medical Packaging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Suez Canal Bank and Medical Packaging, you can compare the effects of market volatilities on Suez Canal and Medical Packaging 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 Suez Canal with a short position of Medical Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suez Canal and Medical Packaging.

Diversification Opportunities for Suez Canal and Medical Packaging

-0.49

Correlation Coefficient

Suez Canal  Medical Packaging

Very good diversification

The 3 months correlation between Suez and Medical is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Suez Canal Bank and Medical Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Packaging and Suez Canal 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 Suez Canal Bank are associated (or correlated) with Medical Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Packaging has no effect on the direction of Suez Canal i.e., Suez Canal and Medical Packaging go up and down completely randomly.

Pair Corralation between Suez Canal and Medical Packaging

Assuming the 90 days trading horizon Suez Canal Bank is expected to generate 1.59 times more return on investment than Medical Packaging. However, Suez Canal is 1.59 times more volatile than Medical Packaging. It trades about 0.25 of its potential returns per unit of risk. Medical Packaging is currently generating about -0.03 per unit of risk. If you would invest  1,520  in Suez Canal Bank on September 17, 2024 and sell it today you would earn a total of  885.00  from holding Suez Canal Bank or generate 58.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Suez Canal Bank  vs.  Medical Packaging

Suez Canal Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Suez Canal Bank are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Suez Canal reported solid returns over the last few months and may actually be approaching a breakup point.

Medical Packaging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Packaging has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Suez Canal and Medical Packaging

The main advantage of trading using opposite Suez Canal and Medical Packaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suez Canal position performs unexpectedly, Medical Packaging 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 Medical Packaging will offset losses from the drop in Medical Packaging's long position.

The idea behind Suez Canal Bank and Medical Packaging 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.