Correlation Between Ezz Steel and Export Development

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

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

Diversification Opportunities for Ezz Steel and Export Development

0.56

Correlation Coefficient

Ezz Steel  Export Development

Very weak diversification

The 3 months correlation between Ezz and Export is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ezz Steel and Export Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Export Development Bank and Ezz Steel 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 Ezz Steel are associated (or correlated) with Export Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Export Development Bank has no effect on the direction of Ezz Steel i.e., Ezz Steel and Export Development go up and down completely randomly.

Pair Corralation between Ezz Steel and Export Development

Assuming the 90 days trading horizon Ezz Steel is expected to under-perform the Export Development. In addition to that, Ezz Steel is 1.17 times more volatile than Export Development Bank. It trades about 0.0 of its total potential returns per unit of risk. Export Development Bank is currently generating about 0.17 per unit of volatility. If you would invest  1,515  in Export Development Bank on September 18, 2024 and sell it today you would earn a total of  335.00  from holding Export Development Bank or generate 22.11% return on investment over 90 days.

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

Ezz Steel  vs.  Export Development Bank

Ezz Steel

Risk-Adjusted Performance

0 of 100

Insignificant

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

Export Development Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Export Development Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Export Development reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ezz Steel and Export Development

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

The idea behind Ezz Steel and Export Development Bank 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.