Correlation Between Amana Developing and Azzad Ethical

Can any of the company-specific risk be diversified away by investing in both Amana Developing 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 Developing 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 Developing World and Azzad Ethical Fund, you can compare the effects of market volatilities on Amana Developing 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 Developing with a short position of Azzad Ethical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amana Developing and Azzad Ethical.

Diversification Opportunities for Amana Developing and Azzad Ethical

0.84

Correlation Coefficient

Amana Developing  Azzad Ethical

Very poor diversification

The 3 months correlation between Amana and Azzad is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Amana Developing World 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 Developing 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 Developing World 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 Developing i.e., Amana Developing and Azzad Ethical go up and down completely randomly.

Pair Corralation between Amana Developing and Azzad Ethical

Assuming the 90 days horizon Amana Developing World is expected to generate 0.82 times more return on investment than Azzad Ethical. However, Amana Developing World is 1.22 times less risky than Azzad Ethical. It trades about -0.06 of its potential returns per unit of risk. Azzad Ethical Fund is currently generating about -0.1 per unit of risk. If you would invest  1,334  in Amana Developing World on December 28, 2024 and sell it today you would lose (45.00) from holding Amana Developing World or give up 3.37% of portfolio value over 90 days.

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

Amana Developing World  vs.  Azzad Ethical Fund

Amana Developing World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amana Developing World has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Amana Developing 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 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.

Pair Trading with Amana Developing and Azzad Ethical

The main advantage of trading using opposite Amana Developing and Azzad Ethical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amana Developing 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 Developing World 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.