Correlation Between Faisal Islamic and El Ahli

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

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

Diversification Opportunities for Faisal Islamic and El Ahli

0.18

Correlation Coefficient

Faisal Islamic  El Ahli

Average diversification

The 3 months correlation between Faisal and AFDI is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Faisal Islamic Bank 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 Faisal Islamic 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 Faisal Islamic Bank 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 Faisal Islamic i.e., Faisal Islamic and El Ahli go up and down completely randomly.

Pair Corralation between Faisal Islamic and El Ahli

Assuming the 90 days trading horizon Faisal Islamic Bank is expected to under-perform the El Ahli. But the stock apears to be less risky and, when comparing its historical volatility, Faisal Islamic Bank is 1.24 times less risky than El Ahli. The stock trades about -0.12 of its potential returns per unit of risk. The El Ahli Investment is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,895  in El Ahli Investment on December 30, 2024 and sell it today you would lose (52.00) from holding El Ahli Investment or give up 1.8% of portfolio value over 90 days.

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

Faisal Islamic Bank  vs.  El Ahli Investment

Faisal Islamic Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Faisal Islamic Bank 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.

El Ahli Investment

Risk-Adjusted Performance

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 nearly stable technical and fundamental indicators, El Ahli is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Faisal Islamic and El Ahli

The main advantage of trading using opposite Faisal Islamic and El Ahli positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faisal Islamic 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 Faisal Islamic Bank 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 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.