Correlation Between Misr Oils and Extracted Oils

Can any of the company-specific risk be diversified away by investing in both Misr Oils and Extracted 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 Misr Oils and Extracted Oils 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 Extracted Oils, you can compare the effects of market volatilities on Misr Oils and Extracted 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 Misr Oils with a short position of Extracted Oils. Check out your portfolio center. Please also check ongoing floating volatility patterns of Misr Oils and Extracted Oils.

Diversification Opportunities for Misr Oils and Extracted Oils

0.46

Correlation Coefficient

Misr Oils  Extracted Oils

Very weak diversification

The 3 months correlation between Misr and Extracted is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Misr Oils Soap and Extracted Oils in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extracted Oils 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 Extracted Oils. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extracted Oils has no effect on the direction of Misr Oils i.e., Misr Oils and Extracted Oils go up and down completely randomly.

Pair Corralation between Misr Oils and Extracted Oils

Assuming the 90 days trading horizon Misr Oils Soap is expected to generate 1.52 times more return on investment than Extracted Oils. However, Misr Oils is 1.52 times more volatile than Extracted Oils. It trades about 0.18 of its potential returns per unit of risk. Extracted Oils is currently generating about 0.08 per unit of risk. If you would invest  6,027  in Misr Oils Soap on April 23, 2025 and sell it today you would earn a total of  1,916  from holding Misr Oils Soap or generate 31.79% 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.  Extracted Oils

Misr Oils Soap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Misr Oils Soap are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Misr Oils reported solid returns over the last few months and may actually be approaching a breakup point.

Extracted Oils

Risk-Adjusted Performance

Modest

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

Pair Trading with Misr Oils and Extracted Oils

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

The idea behind Misr Oils Soap and Extracted Oils 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.