Correlation Between Iron and Egyptian Transport

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

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

Diversification Opportunities for Iron and Egyptian Transport

-0.25

Correlation Coefficient

Iron  Egyptian Transport

Very good diversification

The 3 months correlation between Iron and Egyptian is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Iron And Steel and Egyptian Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Transport and 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 Iron And Steel 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 Iron i.e., Iron and Egyptian Transport go up and down completely randomly.

Pair Corralation between Iron and Egyptian Transport

Assuming the 90 days trading horizon Iron And Steel is expected to under-perform the Egyptian Transport. But the stock apears to be less risky and, when comparing its historical volatility, Iron And Steel is 1.53 times less risky than Egyptian Transport. The stock trades about -0.05 of its potential returns per unit of risk. The Egyptian Transport is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  413.00  in Egyptian Transport on September 17, 2024 and sell it today you would earn a total of  164.00  from holding Egyptian Transport or generate 39.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.11%
Values	Daily Returns

Iron And Steel  vs.  Egyptian Transport

Iron And Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron And Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Egyptian Transport

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Transport are ranked lower than 15 (%) 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 Iron and Egyptian Transport

The main advantage of trading using opposite Iron and Egyptian Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron 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 Iron And Steel 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.