Correlation Between Al Ghazi and Unity Foods

Can any of the company-specific risk be diversified away by investing in both Al Ghazi and Unity Foods 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 Al Ghazi and Unity Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Al Ghazi Tractors and Unity Foods, you can compare the effects of market volatilities on Al Ghazi and Unity Foods 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 Al Ghazi with a short position of Unity Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Ghazi and Unity Foods.

Diversification Opportunities for Al Ghazi and Unity Foods

0.77

Correlation Coefficient

Al Ghazi  Unity Foods

Poor diversification

The 3 months correlation between AGTL and Unity is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Al Ghazi Tractors and Unity Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Foods and Al Ghazi 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 Al Ghazi Tractors are associated (or correlated) with Unity Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Foods has no effect on the direction of Al Ghazi i.e., Al Ghazi and Unity Foods go up and down completely randomly.

Pair Corralation between Al Ghazi and Unity Foods

Assuming the 90 days trading horizon Al Ghazi is expected to generate 1.19 times less return on investment than Unity Foods. But when comparing it to its historical volatility, Al Ghazi Tractors is 1.08 times less risky than Unity Foods. It trades about 0.08 of its potential returns per unit of risk. Unity Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,376  in Unity Foods on September 26, 2024 and sell it today you would earn a total of  2,076  from holding Unity Foods or generate 150.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.84%
Values	Daily Returns

Al Ghazi Tractors  vs.  Unity Foods

Al Ghazi Tractors

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Al Ghazi Tractors are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Al Ghazi sustained solid returns over the last few months and may actually be approaching a breakup point.

Unity Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Unity Foods disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Ghazi and Unity Foods

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

The idea behind Al Ghazi Tractors and Unity Foods 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.

Check out your portfolio center.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.