Correlation Between International Agricultural and Egyptian Transport

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

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

Diversification Opportunities for International Agricultural and Egyptian Transport

0.74

Correlation Coefficient

International Agricultural  Egyptian Transport

Poor diversification

The 3 months correlation between International and Egyptian is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding International Agricultural Pro and Egyptian Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Transport and International Agricultural 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 International Agricultural Products are associated (or correlated) with Egyptian Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Transport has no effect on the direction of International Agricultural i.e., International Agricultural and Egyptian Transport go up and down completely randomly.

Pair Corralation between International Agricultural and Egyptian Transport

Assuming the 90 days trading horizon International Agricultural is expected to generate 1.79 times less return on investment than Egyptian Transport. But when comparing it to its historical volatility, International Agricultural Products is 1.53 times less risky than Egyptian Transport. It trades about 0.16 of its potential returns per unit of risk. Egyptian Transport is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  424.00  in Egyptian Transport on September 24, 2024 and sell it today you would earn a total of  151.00  from holding Egyptian Transport or generate 35.61% return on investment over 90 days.

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

International Agricultural Pro  vs.  Egyptian Transport

International Agricultural

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Agricultural Products are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, International Agricultural reported solid returns over the last few months and may actually be approaching a breakup point.

Egyptian Transport

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Transport are ranked lower than 14 (%) 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.

Pair Trading with International Agricultural and Egyptian Transport

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

The idea behind International Agricultural Products and Egyptian Transport 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.