Correlation Between Azzad Ethical and Amana Developing

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

Diversification Opportunities for Azzad Ethical and Amana Developing

0.79

Correlation Coefficient

Azzad Ethical  Amana Developing

Poor diversification

The 3 months correlation between Azzad and Amana is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Azzad Ethical Fund and Amana Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Developing World 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 Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Developing World has no effect on the direction of Azzad Ethical i.e., Azzad Ethical and Amana Developing go up and down completely randomly.

Pair Corralation between Azzad Ethical and Amana Developing

Assuming the 90 days horizon Azzad Ethical Fund is expected to under-perform the Amana Developing. In addition to that, Azzad Ethical is 1.23 times more volatile than Amana Developing World. It trades about -0.1 of its total potential returns per unit of risk. Amana Developing World is currently generating about -0.05 per unit of volatility. If you would invest  1,338  in Amana Developing World on December 28, 2024 and sell it today you would lose (40.00) from holding Amana Developing World or give up 2.99% 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 Developing World

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 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.

Amana Developing World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amana Developing World has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Amana Developing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Azzad Ethical and Amana Developing

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

The idea behind Azzad Ethical Fund and Amana Developing World 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.