Correlation Between Egyptian Financial and Sidi Kerir

Can any of the company-specific risk be diversified away by investing in both Egyptian Financial and Sidi Kerir 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 Sidi Kerir 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 Sidi Kerir Petrochemicals, you can compare the effects of market volatilities on Egyptian Financial and Sidi Kerir 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 Sidi Kerir. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptian Financial and Sidi Kerir.

Diversification Opportunities for Egyptian Financial and Sidi Kerir

-0.82

Correlation Coefficient

Egyptian Financial  Sidi Kerir

Pay attention - limited upside

The 3 months correlation between Egyptian and Sidi is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Financial Industrial and Sidi Kerir Petrochemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sidi Kerir Petrochemicals 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 Sidi Kerir. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sidi Kerir Petrochemicals has no effect on the direction of Egyptian Financial i.e., Egyptian Financial and Sidi Kerir go up and down completely randomly.

Pair Corralation between Egyptian Financial and Sidi Kerir

Assuming the 90 days trading horizon Egyptian Financial Industrial is expected to generate 1.12 times more return on investment than Sidi Kerir. However, Egyptian Financial is 1.12 times more volatile than Sidi Kerir Petrochemicals. It trades about 0.21 of its potential returns per unit of risk. Sidi Kerir Petrochemicals is currently generating about -0.22 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 Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Egyptian Financial Industrial  vs.  Sidi Kerir Petrochemicals

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.

Sidi Kerir Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sidi Kerir Petrochemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Egyptian Financial and Sidi Kerir

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

The idea behind Egyptian Financial Industrial and Sidi Kerir Petrochemicals 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.