Correlation Between Azzad Ethical and Amana Growth

Can any of the company-specific risk be diversified away by investing in both Azzad Ethical and Amana Growth 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 Azzad Ethical and Amana Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Azzad Ethical Fund and Amana Growth Fund, you can compare the effects of market volatilities on Azzad Ethical and Amana Growth 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 Azzad Ethical with a short position of Amana Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azzad Ethical and Amana Growth.

Diversification Opportunities for Azzad Ethical and Amana Growth

0.66

Correlation Coefficient

Azzad Ethical  Amana Growth

Poor diversification

The 3 months correlation between Azzad and Amana is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Azzad Ethical Fund and Amana Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Growth and Azzad Ethical 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 Azzad Ethical Fund are associated (or correlated) with Amana Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Growth has no effect on the direction of Azzad Ethical i.e., Azzad Ethical and Amana Growth go up and down completely randomly.

Pair Corralation between Azzad Ethical and Amana Growth

Assuming the 90 days horizon Azzad Ethical Fund is expected to under-perform the Amana Growth. In addition to that, Azzad Ethical is 1.07 times more volatile than Amana Growth Fund. It trades about -0.39 of its total potential returns per unit of risk. Amana Growth Fund is currently generating about -0.04 per unit of volatility. If you would invest  7,935  in Amana Growth Fund on December 4, 2024 and sell it today you would lose (65.00) from holding Amana Growth Fund or give up 0.82% of portfolio value over 90 days.

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

Azzad Ethical Fund  vs.  Amana Growth Fund

Azzad Ethical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Azzad Ethical Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Amana Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amana Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Azzad Ethical and Amana Growth

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

The idea behind Azzad Ethical Fund and Amana Growth Fund 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.