Correlation Between Oriental Food and Al Aqar

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

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

Diversification Opportunities for Oriental Food and Al Aqar

0.69

Correlation Coefficient

Oriental Food  Al Aqar

Poor diversification

The 3 months correlation between Oriental and 5116 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Food Industries and Al Aqar Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Aqar Healthcare and Oriental Food 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 Oriental Food Industries are associated (or correlated) with Al Aqar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Aqar Healthcare has no effect on the direction of Oriental Food i.e., Oriental Food and Al Aqar go up and down completely randomly.

Pair Corralation between Oriental Food and Al Aqar

Assuming the 90 days trading horizon Oriental Food Industries is expected to generate 1.68 times more return on investment than Al Aqar. However, Oriental Food is 1.68 times more volatile than Al Aqar Healthcare. It trades about -0.04 of its potential returns per unit of risk. Al Aqar Healthcare is currently generating about -0.13 per unit of risk. If you would invest  166.00  in Oriental Food Industries on November 29, 2024 and sell it today you would lose (8.00) from holding Oriental Food Industries or give up 4.82% of portfolio value over 90 days.

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

Oriental Food Industries  vs.  Al Aqar Healthcare

Oriental Food Industries

Risk-Adjusted Performance

Very Weak

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

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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Oriental Food and Al Aqar

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

The idea behind Oriental Food Industries and Al Aqar Healthcare 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.