Correlation Between El Ahli and Faisal Islamic

Can any of the company-specific risk be diversified away by investing in both El Ahli and Faisal Islamic 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 El Ahli and Faisal Islamic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between El Ahli Investment and Faisal Islamic Bank, you can compare the effects of market volatilities on El Ahli and Faisal Islamic 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 El Ahli with a short position of Faisal Islamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Ahli and Faisal Islamic.

Diversification Opportunities for El Ahli and Faisal Islamic

0.15

Correlation Coefficient

El Ahli  Faisal Islamic

Average diversification

The 3 months correlation between AFDI and Faisal is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding El Ahli Investment and Faisal Islamic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faisal Islamic Bank and El Ahli 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 El Ahli Investment are associated (or correlated) with Faisal Islamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faisal Islamic Bank has no effect on the direction of El Ahli i.e., El Ahli and Faisal Islamic go up and down completely randomly.

Pair Corralation between El Ahli and Faisal Islamic

Assuming the 90 days trading horizon El Ahli Investment is expected to under-perform the Faisal Islamic. But the stock apears to be less risky and, when comparing its historical volatility, El Ahli Investment is 1.48 times less risky than Faisal Islamic. The stock trades about -0.03 of its potential returns per unit of risk. The Faisal Islamic Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,097  in Faisal Islamic Bank on September 15, 2024 and sell it today you would earn a total of  812.00  from holding Faisal Islamic Bank or generate 26.22% return on investment over 90 days.

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

El Ahli Investment  vs.  Faisal Islamic Bank

El Ahli Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Ahli Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, El Ahli is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Faisal Islamic Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Faisal Islamic Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Faisal Islamic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with El Ahli and Faisal Islamic

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

The idea behind El Ahli Investment and Faisal Islamic Bank 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.