Correlation Between Arab Moltaka and United Bank

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

Diversification Opportunities for Arab Moltaka and United Bank

-0.01

Correlation Coefficient

Arab Moltaka  United Bank

Good diversification

The 3 months correlation between Arab and United is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Arab Moltaka Investments and The United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bank 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 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 Arab Moltaka i.e., Arab Moltaka and United Bank go up and down completely randomly.

Pair Corralation between Arab Moltaka and United Bank

Assuming the 90 days trading horizon Arab Moltaka Investments is expected to under-perform the United Bank. In addition to that, Arab Moltaka is 4.27 times more volatile than The United Bank. It trades about -0.03 of its total potential returns per unit of risk. The United Bank is currently generating about 0.07 per unit of volatility. If you would invest  1,429  in The United Bank on October 25, 2024 and sell it today you would earn a total of  14.00  from holding The United Bank or generate 0.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.98%
Values	Daily Returns

Arab Moltaka Investments  vs.  The United Bank

Arab Moltaka Investments

Risk-Adjusted Performance

0 of 100

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 nearly stable technical and fundamental indicators, Arab Moltaka is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 Arab Moltaka and United Bank

The main advantage of trading using opposite Arab Moltaka and United Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arab Moltaka 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 Arab Moltaka Investments 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.