Correlation Between El Ahli and United Bank

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

Diversification Opportunities for El Ahli and United Bank

-0.06

Correlation Coefficient

El Ahli  United Bank

Good diversification

The 3 months correlation between AFDI and United is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding El Ahli Investment and The United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United 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 United Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bank has no effect on the direction of El Ahli i.e., El Ahli and United Bank go up and down completely randomly.

Pair Corralation between El Ahli and United Bank

Assuming the 90 days trading horizon El Ahli Investment is expected to under-perform the United Bank. In addition to that, El Ahli is 20.58 times more volatile than The United Bank. It trades about -0.09 of its total potential returns per unit of risk. The United Bank is currently generating about 0.91 per unit of volatility. If you would invest  1,419  in The United Bank on October 24, 2024 and sell it today you would earn a total of  24.00  from holding The United Bank or generate 1.69% return on investment over 90 days.

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

El Ahli Investment  vs.  The United 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 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.

United Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The United Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, United Bank 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 United Bank

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

The idea behind El Ahli Investment and The United 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.