Correlation Between Faisal Islamic and Saudi Egyptian

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

Diversification Opportunities for Faisal Islamic and Saudi Egyptian

0.22

Correlation Coefficient

Faisal Islamic  Saudi Egyptian

Modest diversification

The 3 months correlation between Faisal and Saudi is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Faisal Islamic Bank 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 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 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 Faisal Islamic i.e., Faisal Islamic and Saudi Egyptian go up and down completely randomly.

Pair Corralation between Faisal Islamic and Saudi Egyptian

Assuming the 90 days trading horizon Faisal Islamic Bank is expected to under-perform the Saudi Egyptian. But the stock apears to be less risky and, when comparing its historical volatility, Faisal Islamic Bank is 3.34 times less risky than Saudi Egyptian. The stock trades about -0.12 of its potential returns per unit of risk. The Saudi Egyptian Investment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,482  in Saudi Egyptian Investment on December 24, 2024 and sell it today you would lose (188.00) from holding Saudi Egyptian Investment or give up 2.9% of portfolio value over 90 days.

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

Faisal Islamic Bank  vs.  Saudi Egyptian 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 weak 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.

Saudi Egyptian Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saudi Egyptian Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Saudi Egyptian 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 Saudi Egyptian

The main advantage of trading using opposite Faisal Islamic and Saudi Egyptian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faisal Islamic 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 Faisal Islamic Bank 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.