Correlation Between Arabia Investments and Edita Food

Can any of the company-specific risk be diversified away by investing in both Arabia Investments and Edita Food 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 Arabia Investments and Edita Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arabia Investments Holding and Edita Food Industries, you can compare the effects of market volatilities on Arabia Investments and Edita Food 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 Arabia Investments with a short position of Edita Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arabia Investments and Edita Food.

Diversification Opportunities for Arabia Investments and Edita Food

-0.41

Correlation Coefficient

Arabia Investments  Edita Food

Very good diversification

The 3 months correlation between Arabia and Edita is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Arabia Investments Holding and Edita Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edita Food Industries and Arabia Investments 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 Arabia Investments Holding are associated (or correlated) with Edita Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edita Food Industries has no effect on the direction of Arabia Investments i.e., Arabia Investments and Edita Food go up and down completely randomly.

Pair Corralation between Arabia Investments and Edita Food

Assuming the 90 days trading horizon Arabia Investments is expected to generate 1.24 times less return on investment than Edita Food. In addition to that, Arabia Investments is 1.23 times more volatile than Edita Food Industries. It trades about 0.05 of its total potential returns per unit of risk. Edita Food Industries is currently generating about 0.08 per unit of volatility. If you would invest  1,340  in Edita Food Industries on October 7, 2024 and sell it today you would earn a total of  1,469  from holding Edita Food Industries or generate 109.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.24%
Values	Daily Returns

Arabia Investments Holding  vs.  Edita Food Industries

Arabia Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arabia Investments Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arabia Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Edita Food Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edita Food Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Edita Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arabia Investments and Edita Food

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

The idea behind Arabia Investments Holding and Edita Food Industries 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.