Correlation Between Arabia Investments and ODIN Investments

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

Diversification Opportunities for Arabia Investments and ODIN Investments

0.19

Correlation Coefficient

Arabia Investments  ODIN Investments

Average diversification

The 3 months correlation between Arabia and ODIN is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Arabia Investments Holding and ODIN Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODIN Investments 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 ODIN Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODIN Investments has no effect on the direction of Arabia Investments i.e., Arabia Investments and ODIN Investments go up and down completely randomly.

Pair Corralation between Arabia Investments and ODIN Investments

Assuming the 90 days trading horizon Arabia Investments Holding is expected to generate 1.11 times more return on investment than ODIN Investments. However, Arabia Investments is 1.11 times more volatile than ODIN Investments. It trades about 0.01 of its potential returns per unit of risk. ODIN Investments is currently generating about -0.19 per unit of risk. If you would invest  51.00  in Arabia Investments Holding on October 20, 2024 and sell it today you would earn a total of  0.00  from holding Arabia Investments Holding or generate 0.0% return on investment over 90 days.

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

Arabia Investments Holding  vs.  ODIN Investments

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.

ODIN Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ODIN Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, ODIN Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arabia Investments and ODIN Investments

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

The idea behind Arabia Investments Holding and ODIN 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.