Correlation Between El Ahli and Al Khair

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

Diversification Opportunities for El Ahli and Al Khair

-0.17

Correlation Coefficient

El Ahli  Al Khair

Good diversification

The 3 months correlation between AFDI and KRDI is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding El Ahli Investment and Al Khair River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Khair River 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 Al Khair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Khair River has no effect on the direction of El Ahli i.e., El Ahli and Al Khair go up and down completely randomly.

Pair Corralation between El Ahli and Al Khair

Assuming the 90 days trading horizon El Ahli Investment is expected to under-perform the Al Khair. But the stock apears to be less risky and, when comparing its historical volatility, El Ahli Investment is 1.22 times less risky than Al Khair. The stock trades about -0.1 of its potential returns per unit of risk. The Al Khair River is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  51.00  in Al Khair River on October 25, 2024 and sell it today you would earn a total of  9.00  from holding Al Khair River or generate 17.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.0%
Values	Daily Returns

El Ahli Investment  vs.  Al Khair River

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Al Khair River

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair River are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Al Khair reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with El Ahli and Al Khair

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

The idea behind El Ahli Investment and Al Khair River 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.