Correlation Between Ismailia National and Arab Aluminum

Can any of the company-specific risk be diversified away by investing in both Ismailia National and Arab Aluminum 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 Ismailia National and Arab Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ismailia National Food and Arab Aluminum, you can compare the effects of market volatilities on Ismailia National and Arab Aluminum 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 Ismailia National with a short position of Arab Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ismailia National and Arab Aluminum.

Diversification Opportunities for Ismailia National and Arab Aluminum

0.61

Correlation Coefficient

Ismailia National  Arab Aluminum

Poor diversification

The 3 months correlation between Ismailia and Arab is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ismailia National Food and Arab Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arab Aluminum and Ismailia National 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 Ismailia National Food are associated (or correlated) with Arab Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arab Aluminum has no effect on the direction of Ismailia National i.e., Ismailia National and Arab Aluminum go up and down completely randomly.

Pair Corralation between Ismailia National and Arab Aluminum

Assuming the 90 days trading horizon Ismailia National is expected to generate 15.73 times less return on investment than Arab Aluminum. But when comparing it to its historical volatility, Ismailia National Food is 1.22 times less risky than Arab Aluminum. It trades about 0.01 of its potential returns per unit of risk. Arab Aluminum is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,312  in Arab Aluminum on September 16, 2024 and sell it today you would earn a total of  162.00  from holding Arab Aluminum or generate 12.35% return on investment over 90 days.

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

Ismailia National Food  vs.  Arab Aluminum

Ismailia National Food

Risk-Adjusted Performance

0 of 100

Very Weak

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

Arab Aluminum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arab Aluminum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arab Aluminum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ismailia National and Arab Aluminum

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

The idea behind Ismailia National Food and Arab Aluminum 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.