Correlation Between El Ahli and Al Baraka

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

Diversification Opportunities for El Ahli and Al Baraka

0.34

Correlation Coefficient

El Ahli  Al Baraka

Weak diversification

The 3 months correlation between AFDI and SAUD is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding El Ahli Investment and Al Baraka Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Baraka 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 Al Baraka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Baraka Bank has no effect on the direction of El Ahli i.e., El Ahli and Al Baraka go up and down completely randomly.

Pair Corralation between El Ahli and Al Baraka

Assuming the 90 days trading horizon El Ahli Investment is expected to generate 2.73 times more return on investment than Al Baraka. However, El Ahli is 2.73 times more volatile than Al Baraka Bank. It trades about -0.09 of its potential returns per unit of risk. Al Baraka Bank is currently generating about -0.42 per unit of risk. If you would invest  3,143  in El Ahli Investment on October 12, 2024 and sell it today you would lose (172.00) from holding El Ahli Investment or give up 5.47% of portfolio value over 90 days.

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

El Ahli Investment  vs.  Al Baraka 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 latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Al Baraka Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Al Baraka Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Al Baraka is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with El Ahli and Al Baraka

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

The idea behind El Ahli Investment and Al Baraka 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.

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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.