Correlation Between Al Aqar and EA Technique

Can any of the company-specific risk be diversified away by investing in both Al Aqar and EA Technique 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 EA Technique 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 EA Technique M, you can compare the effects of market volatilities on Al Aqar and EA Technique 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 EA Technique. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Aqar and EA Technique.

Diversification Opportunities for Al Aqar and EA Technique

0.45

Correlation Coefficient

Al Aqar  EA Technique

Very weak diversification

The 3 months correlation between 5116 and 5259 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Al Aqar Healthcare and EA Technique M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Technique M 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 EA Technique. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Technique M has no effect on the direction of Al Aqar i.e., Al Aqar and EA Technique go up and down completely randomly.

Pair Corralation between Al Aqar and EA Technique

Assuming the 90 days trading horizon Al Aqar Healthcare is expected to under-perform the EA Technique. But the stock apears to be less risky and, when comparing its historical volatility, Al Aqar Healthcare is 3.55 times less risky than EA Technique. The stock trades about -0.1 of its potential returns per unit of risk. The EA Technique M is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  30.00  in EA Technique M on December 30, 2024 and sell it today you would lose (2.00) from holding EA Technique M or give up 6.67% of portfolio value over 90 days.

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

Al Aqar Healthcare  vs.  EA Technique M

Al Aqar Healthcare

Risk-Adjusted Performance

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 current stock price mess, may contribute to short-term losses for the institutional investors.

EA Technique M

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Al Aqar and EA Technique

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

The idea behind Al Aqar Healthcare and EA Technique M 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.