Correlation Between Amana Growth and Amana Income

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

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

Diversification Opportunities for Amana Growth and Amana Income

0.57

Correlation Coefficient

Amana Growth  Amana Income

Very weak diversification

The 3 months correlation between Amana and Amana is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Amana Growth Fund and Amana Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Income and Amana Growth 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 Amana Growth Fund are associated (or correlated) with Amana Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Income has no effect on the direction of Amana Growth i.e., Amana Growth and Amana Income go up and down completely randomly.

Pair Corralation between Amana Growth and Amana Income

Assuming the 90 days horizon Amana Growth Fund is expected to under-perform the Amana Income. In addition to that, Amana Growth is 1.48 times more volatile than Amana Income Fund. It trades about -0.1 of its total potential returns per unit of risk. Amana Income Fund is currently generating about -0.01 per unit of volatility. If you would invest  6,424  in Amana Income Fund on December 28, 2024 and sell it today you would lose (45.00) from holding Amana Income Fund or give up 0.7% of portfolio value over 90 days.

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

Amana Growth Fund  vs.  Amana Income Fund

Amana Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amana Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Amana Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amana Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Amana Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amana Growth and Amana Income

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

The idea behind Amana Growth Fund and Amana Income Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.