Correlation Between Arabia Investments and Saudi Egyptian

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

Diversification Opportunities for Arabia Investments and Saudi Egyptian

-0.4

Correlation Coefficient

Arabia Investments  Saudi Egyptian

Very good diversification

The 3 months correlation between Arabia and Saudi is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Arabia Investments Holding and Saudi Egyptian Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saudi Egyptian 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 Saudi Egyptian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saudi Egyptian Investment has no effect on the direction of Arabia Investments i.e., Arabia Investments and Saudi Egyptian go up and down completely randomly.

Pair Corralation between Arabia Investments and Saudi Egyptian

Assuming the 90 days trading horizon Arabia Investments is expected to generate 1.63 times less return on investment than Saudi Egyptian. But when comparing it to its historical volatility, Arabia Investments Holding is 1.13 times less risky than Saudi Egyptian. It trades about 0.04 of its potential returns per unit of risk. Saudi Egyptian Investment is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,851  in Saudi Egyptian Investment on September 15, 2024 and sell it today you would earn a total of  631.00  from holding Saudi Egyptian Investment or generate 10.78% return on investment over 90 days.

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

Arabia Investments Holding  vs.  Saudi Egyptian Investment

Arabia Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arabia Investments Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Saudi Egyptian Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saudi Egyptian Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Saudi Egyptian 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 Saudi Egyptian

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

The idea behind Arabia Investments Holding and Saudi Egyptian Investment 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.