Correlation Between Reacap Financial and Egypt Aluminum

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

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

Diversification Opportunities for Reacap Financial and Egypt Aluminum

0.05

Correlation Coefficient

Reacap Financial  Egypt Aluminum

Significant diversification

The 3 months correlation between Reacap and Egypt is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Reacap Financial Investments and Egypt Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Egypt Aluminum and Reacap Financial 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 Reacap Financial Investments are associated (or correlated) with Egypt Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Egypt Aluminum has no effect on the direction of Reacap Financial i.e., Reacap Financial and Egypt Aluminum go up and down completely randomly.

Pair Corralation between Reacap Financial and Egypt Aluminum

Assuming the 90 days trading horizon Reacap Financial Investments is expected to generate 1.6 times more return on investment than Egypt Aluminum. However, Reacap Financial is 1.6 times more volatile than Egypt Aluminum. It trades about 0.08 of its potential returns per unit of risk. Egypt Aluminum is currently generating about 0.06 per unit of risk. If you would invest  621.00  in Reacap Financial Investments on September 16, 2024 and sell it today you would earn a total of  70.00  from holding Reacap Financial Investments or generate 11.27% return on investment over 90 days.

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

Reacap Financial Investments  vs.  Egypt Aluminum

Reacap Financial Inv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reacap Financial Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Reacap Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Egypt Aluminum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Egypt Aluminum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Egypt Aluminum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Reacap Financial and Egypt Aluminum

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

The idea behind Reacap Financial Investments and Egypt 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.