Correlation Between Arabian Food and El Ahli

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

By analyzing existing cross correlation between Arabian Food Industries and El Ahli Investment, you can compare the effects of market volatilities on Arabian Food and El Ahli 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 Arabian Food with a short position of El Ahli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arabian Food and El Ahli.

Diversification Opportunities for Arabian Food and El Ahli

0.11

Correlation Coefficient

Arabian Food  El Ahli

Average diversification

The 3 months correlation between Arabian and AFDI is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Arabian Food Industries and El Ahli Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Ahli Investment and Arabian Food 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 Arabian Food Industries are associated (or correlated) with El Ahli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Ahli Investment has no effect on the direction of Arabian Food i.e., Arabian Food and El Ahli go up and down completely randomly.

Pair Corralation between Arabian Food and El Ahli

Assuming the 90 days trading horizon Arabian Food Industries is expected to generate 0.23 times more return on investment than El Ahli. However, Arabian Food Industries is 4.33 times less risky than El Ahli. It trades about 0.13 of its potential returns per unit of risk. El Ahli Investment is currently generating about -0.09 per unit of risk. If you would invest  2,707  in Arabian Food Industries on October 12, 2024 and sell it today you would earn a total of  43.00  from holding Arabian Food Industries or generate 1.59% return on investment over 90 days.

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

Arabian Food Industries  vs.  El Ahli Investment

Arabian Food Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arabian Food Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arabian Food reported solid returns over the last few months and may actually be approaching a breakup point.

El Ahli Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Ahli Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Arabian Food and El Ahli

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

The idea behind Arabian Food Industries and El Ahli Investment 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.