Correlation Between Arab Moltaka and Reacap Financial

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

Diversification Opportunities for Arab Moltaka and Reacap Financial

0.63

Correlation Coefficient

Arab Moltaka  Reacap Financial

Poor diversification

The 3 months correlation between Arab and Reacap is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Arab Moltaka Investments and Reacap Financial Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reacap Financial Inv 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 Reacap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reacap Financial Inv has no effect on the direction of Arab Moltaka i.e., Arab Moltaka and Reacap Financial go up and down completely randomly.

Pair Corralation between Arab Moltaka and Reacap Financial

Assuming the 90 days trading horizon Arab Moltaka is expected to generate 2.99 times less return on investment than Reacap Financial. In addition to that, Arab Moltaka is 1.43 times more volatile than Reacap Financial Investments. It trades about 0.05 of its total potential returns per unit of risk. Reacap Financial Investments is currently generating about 0.23 per unit of volatility. If you would invest  660.00  in Reacap Financial Investments on December 5, 2024 and sell it today you would earn a total of  40.00  from holding Reacap Financial Investments or generate 6.06% return on investment over 90 days.

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

Arab Moltaka Investments  vs.  Reacap Financial Investments

Arab Moltaka Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arab Moltaka Investments 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Reacap Financial Inv

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Arab Moltaka and Reacap Financial

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

The idea behind Arab Moltaka Investments and Reacap Financial Investments 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.