Correlation Between Contact Financial and Misr National

Can any of the company-specific risk be diversified away by investing in both Contact Financial and Misr National 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 Contact Financial and Misr National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Contact Financial Holding and Misr National Steel, you can compare the effects of market volatilities on Contact Financial and Misr National 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 Contact Financial with a short position of Misr National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Contact Financial and Misr National.

Diversification Opportunities for Contact Financial and Misr National

0.6

Correlation Coefficient

Contact Financial  Misr National

Poor diversification

The 3 months correlation between Contact and Misr is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Contact Financial Holding and Misr National Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr National Steel and Contact Financial 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 Contact Financial Holding are associated (or correlated) with Misr National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr National Steel has no effect on the direction of Contact Financial i.e., Contact Financial and Misr National go up and down completely randomly.

Pair Corralation between Contact Financial and Misr National

Assuming the 90 days trading horizon Contact Financial Holding is expected to under-perform the Misr National. In addition to that, Contact Financial is 1.17 times more volatile than Misr National Steel. It trades about -0.03 of its total potential returns per unit of risk. Misr National Steel is currently generating about 0.12 per unit of volatility. If you would invest  454.00  in Misr National Steel on September 17, 2024 and sell it today you would earn a total of  80.00  from holding Misr National Steel or generate 17.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.11%
Values	Daily Returns

Contact Financial Holding  vs.  Misr National Steel

Contact Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Contact Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Contact Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Misr National Steel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Misr National Steel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Misr National reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Contact Financial and Misr National

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

The idea behind Contact Financial Holding and Misr National 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.