Correlation Between Arabia Investments and Orascom Investment

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

Diversification Opportunities for Arabia Investments and Orascom Investment

0.47

Correlation Coefficient

Arabia Investments  Orascom Investment

Very weak diversification

The 3 months correlation between Arabia and Orascom is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Arabia Investments Holding and Orascom Investment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orascom Investment 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 Orascom Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orascom Investment has no effect on the direction of Arabia Investments i.e., Arabia Investments and Orascom Investment go up and down completely randomly.

Pair Corralation between Arabia Investments and Orascom Investment

Assuming the 90 days trading horizon Arabia Investments Holding is expected to under-perform the Orascom Investment. But the stock apears to be less risky and, when comparing its historical volatility, Arabia Investments Holding is 1.84 times less risky than Orascom Investment. The stock trades about -0.01 of its potential returns per unit of risk. The Orascom Investment Holding is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  56.00  in Orascom Investment Holding on December 29, 2024 and sell it today you would earn a total of  10.00  from holding Orascom Investment Holding or generate 17.86% return on investment over 90 days.

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

Arabia Investments Holding  vs.  Orascom Investment Holding

Arabia Investments

Risk-Adjusted Performance

Very Weak

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

Orascom Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orascom Investment Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Orascom Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arabia Investments and Orascom Investment

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

The idea behind Arabia Investments Holding and Orascom Investment Holding 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.