Correlation Between Egyptians For and Ezz Steel

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

By analyzing existing cross correlation between Egyptians For Investment and Ezz Steel, you can compare the effects of market volatilities on Egyptians For and Ezz Steel 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 Egyptians For with a short position of Ezz Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Egyptians For and Ezz Steel.

Diversification Opportunities for Egyptians For and Ezz Steel

0.5

Correlation Coefficient

Egyptians For  Ezz Steel

Very weak diversification

The 3 months correlation between Egyptians and Ezz is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Egyptians For Investment and Ezz Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ezz Steel and Egyptians For 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 Egyptians For Investment are associated (or correlated) with Ezz Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ezz Steel has no effect on the direction of Egyptians For i.e., Egyptians For and Ezz Steel go up and down completely randomly.

Pair Corralation between Egyptians For and Ezz Steel

Assuming the 90 days trading horizon Egyptians For Investment is expected to under-perform the Ezz Steel. In addition to that, Egyptians For is 1.94 times more volatile than Ezz Steel. It trades about -0.08 of its total potential returns per unit of risk. Ezz Steel is currently generating about 0.12 per unit of volatility. If you would invest  3,849  in Ezz Steel on September 12, 2024 and sell it today you would earn a total of  6,806  from holding Ezz Steel or generate 176.83% return on investment over 90 days.

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

Egyptians For Investment  vs.  Ezz Steel

Egyptians For Investment

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptians For Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptians For reported solid returns over the last few months and may actually be approaching a breakup point.

Ezz Steel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ezz Steel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Ezz Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Egyptians For and Ezz Steel

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

The idea behind Egyptians For Investment and Ezz 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.