Correlation Between Egyptian Iron and Misr Oils

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

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

Diversification Opportunities for Egyptian Iron and Misr Oils

0.25

Correlation Coefficient

Egyptian Iron  Misr Oils

Modest diversification

The 3 months correlation between Egyptian and Misr is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Egyptian Iron Steel and Misr Oils Soap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Misr Oils Soap and Egyptian Iron 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 Iron Steel are associated (or correlated) with Misr Oils. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Misr Oils Soap has no effect on the direction of Egyptian Iron i.e., Egyptian Iron and Misr Oils go up and down completely randomly.

Pair Corralation between Egyptian Iron and Misr Oils

Assuming the 90 days trading horizon Egyptian Iron Steel is expected to generate 2.51 times more return on investment than Misr Oils. However, Egyptian Iron is 2.51 times more volatile than Misr Oils Soap. It trades about 0.13 of its potential returns per unit of risk. Misr Oils Soap is currently generating about 0.08 per unit of risk. If you would invest  4,053  in Egyptian Iron Steel on September 3, 2024 and sell it today you would earn a total of  1,106  from holding Egyptian Iron Steel or generate 27.29% return on investment over 90 days.

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

Egyptian Iron Steel  vs.  Misr Oils Soap

Egyptian Iron Steel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Iron Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Misr Oils Soap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Oils Soap are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Misr Oils may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Egyptian Iron and Misr Oils

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

The idea behind Egyptian Iron Steel and Misr Oils Soap 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 CEOs Directory module to screen CEOs from public companies around the world.