Correlation Between Faisal Islamic and B Investments

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

Diversification Opportunities for Faisal Islamic and B Investments

0.71

Correlation Coefficient

Faisal Islamic  B Investments

Poor diversification

The 3 months correlation between Faisal and BINV is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Faisal Islamic Bank and B Investments Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Investments Holding 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 B Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Investments Holding has no effect on the direction of Faisal Islamic i.e., Faisal Islamic and B Investments go up and down completely randomly.

Pair Corralation between Faisal Islamic and B Investments

Assuming the 90 days trading horizon Faisal Islamic Bank is expected to generate 1.6 times more return on investment than B Investments. However, Faisal Islamic is 1.6 times more volatile than B Investments Holding. It trades about 0.16 of its potential returns per unit of risk. B Investments Holding is currently generating about 0.1 per unit of risk. If you would invest  3,114  in Faisal Islamic Bank on September 17, 2024 and sell it today you would earn a total of  795.00  from holding Faisal Islamic Bank or generate 25.53% return on investment over 90 days.

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

Faisal Islamic Bank  vs.  B Investments Holding

Faisal Islamic Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Faisal Islamic Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Faisal Islamic reported solid returns over the last few months and may actually be approaching a breakup point.

B Investments Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B Investments Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, B Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Faisal Islamic and B Investments

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

The idea behind Faisal Islamic Bank and B Investments Holding 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.