Correlation Between Egyptian Transport and Telecom Egypt

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

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

Diversification Opportunities for Egyptian Transport and Telecom Egypt

-0.01

Correlation Coefficient

Egyptian Transport  Telecom Egypt

Good diversification

The 3 months correlation between Egyptian and Telecom is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Transport and Telecom Egypt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Egypt and Egyptian Transport 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 Transport are associated (or correlated) with Telecom Egypt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Egypt has no effect on the direction of Egyptian Transport i.e., Egyptian Transport and Telecom Egypt go up and down completely randomly.

Pair Corralation between Egyptian Transport and Telecom Egypt

Assuming the 90 days trading horizon Egyptian Transport is expected to generate 1.7 times more return on investment than Telecom Egypt. However, Egyptian Transport is 1.7 times more volatile than Telecom Egypt. It trades about 0.23 of its potential returns per unit of risk. Telecom Egypt is currently generating about 0.01 per unit of risk. If you would invest  416.00  in Egyptian Transport on September 15, 2024 and sell it today you would earn a total of  188.00  from holding Egyptian Transport or generate 45.19% return on investment over 90 days.

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

Egyptian Transport  vs.  Telecom Egypt

Egyptian Transport

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Transport are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Telecom Egypt

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Egyptian Transport and Telecom Egypt

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

The idea behind Egyptian Transport and Telecom Egypt 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.