Correlation Between El Ahli and Memphis Pharmaceuticals

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

Diversification Opportunities for El Ahli and Memphis Pharmaceuticals

0.7

Correlation Coefficient

El Ahli  Memphis Pharmaceuticals

Poor diversification

The 3 months correlation between AFDI and Memphis is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding El Ahli Investment and Memphis Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Memphis Pharmaceuticals 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 Memphis Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Memphis Pharmaceuticals has no effect on the direction of El Ahli i.e., El Ahli and Memphis Pharmaceuticals go up and down completely randomly.

Pair Corralation between El Ahli and Memphis Pharmaceuticals

Assuming the 90 days trading horizon El Ahli Investment is expected to under-perform the Memphis Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, El Ahli Investment is 1.83 times less risky than Memphis Pharmaceuticals. The stock trades about -0.07 of its potential returns per unit of risk. The Memphis Pharmaceuticals is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  5,225  in Memphis Pharmaceuticals on October 23, 2024 and sell it today you would lose (135.00) from holding Memphis Pharmaceuticals or give up 2.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.75%
Values	Daily Returns

El Ahli Investment  vs.  Memphis Pharmaceuticals

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 weak 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.

Memphis Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Memphis Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Memphis Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with El Ahli and Memphis Pharmaceuticals

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

The idea behind El Ahli Investment and Memphis Pharmaceuticals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.