Correlation Between Microsoft and Egyptian Financial

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

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

Diversification Opportunities for Microsoft and Egyptian Financial

0.29

Correlation Coefficient

Microsoft  Egyptian Financial

Modest diversification

The 3 months correlation between Microsoft and Egyptian is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Egyptian Financial Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egyptian Financial and Microsoft 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 Microsoft are associated (or correlated) with Egyptian Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egyptian Financial has no effect on the direction of Microsoft i.e., Microsoft and Egyptian Financial go up and down completely randomly.

Pair Corralation between Microsoft and Egyptian Financial

Given the investment horizon of 90 days Microsoft is expected to generate 18.06 times less return on investment than Egyptian Financial. But when comparing it to its historical volatility, Microsoft is 2.37 times less risky than Egyptian Financial. It trades about 0.03 of its potential returns per unit of risk. Egyptian Financial Industrial is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  10,861  in Egyptian Financial Industrial on September 25, 2024 and sell it today you would earn a total of  4,139  from holding Egyptian Financial Industrial or generate 38.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.69%
Values	Daily Returns

Microsoft  vs.  Egyptian Financial Industrial

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Egyptian Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Egyptian Financial Industrial are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egyptian Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Egyptian Financial

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

The idea behind Microsoft and Egyptian Financial Industrial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.