Correlation Between Misr Oils and Export Development

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

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

Diversification Opportunities for Misr Oils and Export Development

0.54

Correlation Coefficient

Misr Oils  Export Development

Very weak diversification

The 3 months correlation between Misr and Export is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Export Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Export Development Bank and Misr Oils 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 Misr Oils Soap are associated (or correlated) with Export Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Export Development Bank has no effect on the direction of Misr Oils i.e., Misr Oils and Export Development go up and down completely randomly.

Pair Corralation between Misr Oils and Export Development

Assuming the 90 days trading horizon Misr Oils is expected to generate 6.34 times less return on investment than Export Development. But when comparing it to its historical volatility, Misr Oils Soap is 1.48 times less risky than Export Development. It trades about 0.04 of its potential returns per unit of risk. Export Development Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,502  in Export Development Bank on September 17, 2024 and sell it today you would earn a total of  330.00  from holding Export Development Bank or generate 21.97% return on investment over 90 days.

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

Misr Oils Soap  vs.  Export Development Bank

Misr Oils Soap

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Oils Soap are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Misr Oils is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Export Development Bank

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Misr Oils and Export Development

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

The idea behind Misr Oils Soap and Export Development Bank 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.