Correlation Between Al Arafa and Global Telecom

Can any of the company-specific risk be diversified away by investing in both Al Arafa and Global Telecom 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 Al Arafa and Global Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Al Arafa Investment and Global Telecom Holding, you can compare the effects of market volatilities on Al Arafa and Global Telecom 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 Al Arafa with a short position of Global Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Arafa and Global Telecom.

Diversification Opportunities for Al Arafa and Global Telecom

1.0

Correlation Coefficient

Al Arafa  Global Telecom

No risk reduction

The 3 months correlation between AIVCB and Global is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Al Arafa Investment and Global Telecom Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Telecom Holding and Al Arafa 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 Al Arafa Investment are associated (or correlated) with Global Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Telecom Holding has no effect on the direction of Al Arafa i.e., Al Arafa and Global Telecom go up and down completely randomly.

Pair Corralation between Al Arafa and Global Telecom

If you would invest  490.00  in Global Telecom Holding on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Global Telecom Holding or generate 0.0% return on investment over 90 days.

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

Al Arafa Investment  vs.  Global Telecom Holding

Al Arafa Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Al Arafa Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Al Arafa is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Global Telecom Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Al Arafa and Global Telecom

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

The idea behind Al Arafa Investment and Global Telecom 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.