Correlation Between Cairo Oils and Misr Oils

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

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

Diversification Opportunities for Cairo Oils and Misr Oils

0.49

Correlation Coefficient

Cairo Oils  Misr Oils

Very weak diversification

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

Pair Corralation between Cairo Oils and Misr Oils

Assuming the 90 days trading horizon Cairo Oils Soap is expected to generate 1.72 times more return on investment than Misr Oils. However, Cairo Oils is 1.72 times more volatile than Misr Oils Soap. It trades about 0.07 of its potential returns per unit of risk. Misr Oils Soap is currently generating about 0.04 per unit of risk. If you would invest  24.00  in Cairo Oils Soap on September 15, 2024 and sell it today you would earn a total of  2.00  from holding Cairo Oils Soap or generate 8.33% return on investment over 90 days.

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

Cairo Oils Soap  vs.  Misr Oils Soap

Cairo Oils Soap

Risk-Adjusted Performance

5 of 100

Modest

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

Misr Oils Soap

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Oils Soap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Misr Oils is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cairo Oils and Misr Oils

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

The idea behind Cairo Oils Soap and Misr Oils Soap 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.