Correlation Between Arabian Food and Saudi Egyptian

Can any of the company-specific risk be diversified away by investing in both Arabian Food and Saudi Egyptian 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 Saudi Egyptian 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 Saudi Egyptian Investment, you can compare the effects of market volatilities on Arabian Food and Saudi Egyptian 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 Saudi Egyptian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arabian Food and Saudi Egyptian.

Diversification Opportunities for Arabian Food and Saudi Egyptian

0.18

Correlation Coefficient

Arabian Food  Saudi Egyptian

Average diversification

The 3 months correlation between Arabian and Saudi is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Arabian Food Industries and Saudi Egyptian Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saudi Egyptian 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 Saudi Egyptian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saudi Egyptian Investment has no effect on the direction of Arabian Food i.e., Arabian Food and Saudi Egyptian go up and down completely randomly.

Pair Corralation between Arabian Food and Saudi Egyptian

Assuming the 90 days trading horizon Arabian Food is expected to generate 10.34 times less return on investment than Saudi Egyptian. But when comparing it to its historical volatility, Arabian Food Industries is 6.83 times less risky than Saudi Egyptian. It trades about 0.16 of its potential returns per unit of risk. Saudi Egyptian Investment is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  6,482  in Saudi Egyptian Investment on October 11, 2024 and sell it today you would earn a total of  1,327  from holding Saudi Egyptian Investment or generate 20.47% 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.  Saudi Egyptian 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.

Saudi Egyptian Investment

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Arabian Food and Saudi Egyptian

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

The idea behind Arabian Food Industries and Saudi Egyptian 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.