Correlation Between Amana Participation and Amana Income

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

Diversification Opportunities for Amana Participation and Amana Income

-0.05

Correlation Coefficient

Amana Participation  Amana Income

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 Participation 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 Participation 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 Participation 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 Participation i.e., Amana Participation and Amana Income go up and down completely randomly.

Pair Corralation between Amana Participation and Amana Income

Assuming the 90 days horizon Amana Participation Fund is expected to generate 0.13 times more return on investment than Amana Income. However, Amana Participation Fund is 7.84 times less risky than Amana Income. It trades about 0.27 of its potential returns per unit of risk. Amana Income Fund is currently generating about -0.01 per unit of risk. 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 Participation Fund  vs.  Amana Income Fund

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.

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 Participation and Amana Income

The main advantage of trading using opposite Amana Participation and Amana Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amana Participation 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 Participation 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.