Correlation Between Egyptian Financial and Orascom Investment

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

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

Diversification Opportunities for Egyptian Financial and Orascom Investment

0.36

Correlation Coefficient

Egyptian Financial  Orascom Investment

Weak diversification

The 3 months correlation between Egyptian and Orascom is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Financial Industrial and Orascom Investment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orascom Investment and Egyptian 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 Egyptian Financial Industrial 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 Egyptian Financial i.e., Egyptian Financial and Orascom Investment go up and down completely randomly.

Pair Corralation between Egyptian Financial and Orascom Investment

Assuming the 90 days trading horizon Egyptian Financial Industrial is expected to generate 1.0 times more return on investment than Orascom Investment. However, Egyptian Financial Industrial is 1.0 times less risky than Orascom Investment. It trades about 0.21 of its potential returns per unit of risk. Orascom Investment Holding is currently generating about 0.19 per unit of risk. If you would invest  10,999  in Egyptian Financial Industrial on September 24, 2024 and sell it today you would earn a total of  4,026  from holding Egyptian Financial Industrial or generate 36.6% return on investment over 90 days.

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

Egyptian Financial Industrial  vs.  Orascom Investment Holding

Egyptian Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Financial Industrial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Financial reported solid returns over the last few months and may actually be approaching a breakup point.

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 Egyptian Financial and Orascom Investment

The main advantage of trading using opposite Egyptian Financial and Orascom Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Egyptian Financial 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 Egyptian Financial Industrial 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.