Correlation Between Amana Income and Azzad Ethical

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

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

Diversification Opportunities for Amana Income and Azzad Ethical

0.57

Correlation Coefficient

Amana Income  Azzad Ethical

Very weak diversification

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

Pair Corralation between Amana Income and Azzad Ethical

Assuming the 90 days horizon Amana Income Fund is expected to generate 0.77 times more return on investment than Azzad Ethical. However, Amana Income Fund is 1.3 times less risky than Azzad Ethical. It trades about -0.08 of its potential returns per unit of risk. Azzad Ethical Fund is currently generating about -0.23 per unit of risk. If you would invest  7,027  in Amana Income Fund on December 4, 2024 and sell it today you would lose (355.00) from holding Amana Income Fund or give up 5.05% of portfolio value over 90 days.

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

Amana Income Fund  vs.  Azzad Ethical Fund

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.

Azzad Ethical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Azzad Ethical Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Amana Income and Azzad Ethical

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

The idea behind Amana Income Fund and Azzad Ethical 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.