Correlation Between Al Aqar and Tex Cycle

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

By analyzing existing cross correlation between Al Aqar Healthcare and Tex Cycle Technology, you can compare the effects of market volatilities on Al Aqar and Tex Cycle 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 Al Aqar with a short position of Tex Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Aqar and Tex Cycle.

Diversification Opportunities for Al Aqar and Tex Cycle

-0.27

Correlation Coefficient

Al Aqar  Tex Cycle

Very good diversification

The 3 months correlation between 5116 and Tex is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Al Aqar Healthcare and Tex Cycle Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tex Cycle Technology and Al Aqar 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 Al Aqar Healthcare are associated (or correlated) with Tex Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tex Cycle Technology has no effect on the direction of Al Aqar i.e., Al Aqar and Tex Cycle go up and down completely randomly.

Pair Corralation between Al Aqar and Tex Cycle

Assuming the 90 days trading horizon Al Aqar is expected to generate 3.75 times less return on investment than Tex Cycle. But when comparing it to its historical volatility, Al Aqar Healthcare is 2.38 times less risky than Tex Cycle. It trades about 0.05 of its potential returns per unit of risk. Tex Cycle Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  71.00  in Tex Cycle Technology on October 21, 2024 and sell it today you would earn a total of  37.00  from holding Tex Cycle Technology or generate 52.11% return on investment over 90 days.

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

Al Aqar Healthcare  vs.  Tex Cycle Technology

Al Aqar Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Al Aqar Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Al Aqar is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Tex Cycle Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tex Cycle Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Tex Cycle is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Al Aqar and Tex Cycle

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

The idea behind Al Aqar Healthcare and Tex Cycle Technology 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..