Correlation Between Arab Moltaka and El Ahli

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

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

Diversification Opportunities for Arab Moltaka and El Ahli

0.26

Correlation Coefficient

Arab Moltaka  El Ahli

Modest diversification

The 3 months correlation between Arab and AFDI is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Arab Moltaka Investments and El Ahli Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Ahli Investment and Arab Moltaka 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 Arab Moltaka Investments are associated (or correlated) with El Ahli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Ahli Investment has no effect on the direction of Arab Moltaka i.e., Arab Moltaka and El Ahli go up and down completely randomly.

Pair Corralation between Arab Moltaka and El Ahli

Assuming the 90 days trading horizon Arab Moltaka Investments is expected to under-perform the El Ahli. But the stock apears to be less risky and, when comparing its historical volatility, Arab Moltaka Investments is 1.22 times less risky than El Ahli. The stock trades about -0.2 of its potential returns per unit of risk. The El Ahli Investment is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,149  in El Ahli Investment on October 10, 2024 and sell it today you would lose (110.00) from holding El Ahli Investment or give up 3.49% of portfolio value over 90 days.

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

Arab Moltaka Investments  vs.  El Ahli Investment

Arab Moltaka Investments

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arab Moltaka Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arab Moltaka reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Arab Moltaka and El Ahli

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

The idea behind Arab Moltaka Investments and El Ahli Investment 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.