Correlation Between Arabia Investments and Speed Medical

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

Diversification Opportunities for Arabia Investments and Speed Medical

0.77

Correlation Coefficient

Arabia Investments  Speed Medical

Poor diversification

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

Pair Corralation between Arabia Investments and Speed Medical

Assuming the 90 days trading horizon Arabia Investments Holding is expected to under-perform the Speed Medical. In addition to that, Arabia Investments is 1.05 times more volatile than Speed Medical. It trades about -0.02 of its total potential returns per unit of risk. Speed Medical is currently generating about -0.01 per unit of volatility. If you would invest  38.00  in Speed Medical on September 21, 2024 and sell it today you would lose (1.00) from holding Speed Medical or give up 2.63% of portfolio value over 90 days.

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

Arabia Investments Holding  vs.  Speed Medical

Arabia Investments

Risk-Adjusted Performance

0 of 100

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.

Speed Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Arabia Investments Holding and Speed Medical 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.