Correlation Between Al Aqar and Eco World

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

Diversification Opportunities for Al Aqar and Eco World

0.55

Correlation Coefficient

Al Aqar  Eco World

Very weak diversification

The 3 months correlation between 5116 and Eco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Al Aqar Healthcare and Eco World Develop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco World Develop 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 Eco World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco World Develop has no effect on the direction of Al Aqar i.e., Al Aqar and Eco World go up and down completely randomly.

Pair Corralation between Al Aqar and Eco World

Assuming the 90 days trading horizon Al Aqar Healthcare is expected to under-perform the Eco World. But the stock apears to be less risky and, when comparing its historical volatility, Al Aqar Healthcare is 3.29 times less risky than Eco World. The stock trades about -0.1 of its potential returns per unit of risk. The Eco World Develop is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  202.00  in Eco World Develop on December 23, 2024 and sell it today you would lose (10.00) from holding Eco World Develop or give up 4.95% 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.  Eco World Develop

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

Eco World Develop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eco World Develop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Eco World 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 Eco World

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

The idea behind Al Aqar Healthcare and Eco World Develop 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .