Correlation Between Al Tawfeek and Reacap Financial

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

Diversification Opportunities for Al Tawfeek and Reacap Financial

0.39

Correlation Coefficient

Al Tawfeek  Reacap Financial

Weak diversification

The 3 months correlation between ATLC and Reacap is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Al Tawfeek Leasing and Reacap Financial Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reacap Financial Inv 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 Reacap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reacap Financial Inv has no effect on the direction of Al Tawfeek i.e., Al Tawfeek and Reacap Financial go up and down completely randomly.

Pair Corralation between Al Tawfeek and Reacap Financial

Assuming the 90 days trading horizon Al Tawfeek Leasing is expected to generate 0.71 times more return on investment than Reacap Financial. However, Al Tawfeek Leasing is 1.4 times less risky than Reacap Financial. It trades about 0.13 of its potential returns per unit of risk. Reacap Financial Investments is currently generating about 0.08 per unit of risk. If you would invest  395.00  in Al Tawfeek Leasing on September 14, 2024 and sell it today you would earn a total of  55.00  from holding Al Tawfeek Leasing or generate 13.92% return on investment over 90 days.

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

Al Tawfeek Leasing  vs.  Reacap Financial Investments

Al Tawfeek Leasing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Al Tawfeek Leasing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Al Tawfeek reported solid returns over the last few months and may actually be approaching a breakup point.

Reacap Financial Inv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reacap Financial Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Reacap Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Tawfeek and Reacap Financial

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

The idea behind Al Tawfeek Leasing and Reacap Financial Investments 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.