Correlation Between Arab Aluminum and ODIN Investments

Can any of the company-specific risk be diversified away by investing in both Arab Aluminum 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 Arab Aluminum and ODIN Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arab Aluminum and ODIN Investments, you can compare the effects of market volatilities on Arab Aluminum 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 Arab Aluminum with a short position of ODIN Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arab Aluminum and ODIN Investments.

Diversification Opportunities for Arab Aluminum and ODIN Investments

0.74

Correlation Coefficient

Arab Aluminum  ODIN Investments

Poor diversification

The 3 months correlation between Arab and ODIN is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Arab Aluminum and ODIN Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODIN Investments and Arab Aluminum 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 Arab Aluminum 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 Arab Aluminum i.e., Arab Aluminum and ODIN Investments go up and down completely randomly.

Pair Corralation between Arab Aluminum and ODIN Investments

Assuming the 90 days trading horizon Arab Aluminum is expected to generate 2.78 times less return on investment than ODIN Investments. But when comparing it to its historical volatility, Arab Aluminum is 1.81 times less risky than ODIN Investments. It trades about 0.03 of its potential returns per unit of risk. ODIN Investments is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  166.00  in ODIN Investments on October 8, 2024 and sell it today you would earn a total of  10.00  from holding ODIN Investments or generate 6.02% return on investment over 90 days.

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

Arab Aluminum  vs.  ODIN Investments

Arab Aluminum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arab Aluminum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Arab Aluminum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ODIN Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ODIN Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, ODIN Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Arab Aluminum and ODIN Investments

The main advantage of trading using opposite Arab Aluminum and ODIN Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arab Aluminum 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 Arab Aluminum 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.