Correlation Between Amana Income and Amana Participation

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

Diversification Opportunities for Amana Income and Amana Participation

-0.05

Correlation Coefficient

Amana Income  Amana Participation

Good diversification

The 3 months correlation between Amana and Amana is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Amana Income Fund and Amana Participation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Participation 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 Amana Participation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Participation has no effect on the direction of Amana Income i.e., Amana Income and Amana Participation go up and down completely randomly.

Pair Corralation between Amana Income and Amana Participation

Assuming the 90 days horizon Amana Income Fund is expected to under-perform the Amana Participation. In addition to that, Amana Income is 7.84 times more volatile than Amana Participation Fund. It trades about -0.01 of its total potential returns per unit of risk. Amana Participation Fund is currently generating about 0.27 per unit of volatility. If you would invest  967.00  in Amana Participation Fund on December 28, 2024 and sell it today you would earn a total of  16.00  from holding Amana Participation Fund or generate 1.65% return on investment over 90 days.

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

Amana Income Fund  vs.  Amana Participation 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.

Amana Participation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amana Participation Fund are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Amana Participation 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 Income and Amana Participation

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

The idea behind Amana Income Fund and Amana Participation 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.