Correlation Between Al Tawfeek and Al Khair

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

By analyzing existing cross correlation between Al Tawfeek Leasing and Al Khair River, you can compare the effects of market volatilities on Al Tawfeek and Al Khair 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 Al Tawfeek with a short position of Al Khair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Tawfeek and Al Khair.

Diversification Opportunities for Al Tawfeek and Al Khair

-0.23

Correlation Coefficient

Al Tawfeek  Al Khair

Very good diversification

The 3 months correlation between ATLC and KRDI is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Al Tawfeek Leasing and Al Khair River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Khair River and Al Tawfeek 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 Al Tawfeek Leasing are associated (or correlated) with Al Khair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Khair River has no effect on the direction of Al Tawfeek i.e., Al Tawfeek and Al Khair go up and down completely randomly.

Pair Corralation between Al Tawfeek and Al Khair

Assuming the 90 days trading horizon Al Tawfeek is expected to generate 15.35 times less return on investment than Al Khair. In addition to that, Al Tawfeek is 1.39 times more volatile than Al Khair River. It trades about 0.0 of its total potential returns per unit of risk. Al Khair River is currently generating about 0.04 per unit of volatility. If you would invest  57.00  in Al Khair River on December 21, 2024 and sell it today you would earn a total of  2.00  from holding Al Khair River or generate 3.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.04%
Values	Daily Returns

Al Tawfeek Leasing  vs.  Al Khair River

Al Tawfeek Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Al Tawfeek Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Al Tawfeek is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Al Khair River

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair River are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Al Khair is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Al Tawfeek and Al Khair

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

The idea behind Al Tawfeek Leasing and Al Khair River 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.