Correlation Between Credit Agricole and Orascom Investment

Can any of the company-specific risk be diversified away by investing in both Credit Agricole and Orascom Investment 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 Credit Agricole and Orascom Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Credit Agricole Egypt and Orascom Investment Holding, you can compare the effects of market volatilities on Credit Agricole and Orascom Investment 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 Credit Agricole with a short position of Orascom Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credit Agricole and Orascom Investment.

Diversification Opportunities for Credit Agricole and Orascom Investment

0.65

Correlation Coefficient

Credit Agricole  Orascom Investment

Poor diversification

The 3 months correlation between Credit and Orascom is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Credit Agricole Egypt and Orascom Investment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orascom Investment and Credit Agricole 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 Credit Agricole Egypt are associated (or correlated) with Orascom Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orascom Investment has no effect on the direction of Credit Agricole i.e., Credit Agricole and Orascom Investment go up and down completely randomly.

Pair Corralation between Credit Agricole and Orascom Investment

Assuming the 90 days trading horizon Credit Agricole is expected to generate 4.31 times less return on investment than Orascom Investment. But when comparing it to its historical volatility, Credit Agricole Egypt is 1.57 times less risky than Orascom Investment. It trades about 0.07 of its potential returns per unit of risk. Orascom Investment Holding is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  41.00  in Orascom Investment Holding on September 16, 2024 and sell it today you would earn a total of  13.00  from holding Orascom Investment Holding or generate 31.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Credit Agricole Egypt  vs.  Orascom Investment Holding

Credit Agricole Egypt

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Agricole Egypt are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Credit Agricole may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Orascom Investment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orascom Investment Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Orascom Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Credit Agricole and Orascom Investment

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

The idea behind Credit Agricole Egypt and Orascom Investment Holding 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.