Correlation Between Al Khair and Arab Moltaka

Can any of the company-specific risk be diversified away by investing in both Al Khair and Arab Moltaka 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 Al Khair and Arab Moltaka into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Al Khair River and Arab Moltaka Investments, you can compare the effects of market volatilities on Al Khair and Arab Moltaka 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 Al Khair with a short position of Arab Moltaka. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Khair and Arab Moltaka.

Diversification Opportunities for Al Khair and Arab Moltaka

-0.21

Correlation Coefficient

Al Khair  Arab Moltaka

Very good diversification

The 3 months correlation between KRDI and Arab is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Al Khair River and Arab Moltaka Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arab Moltaka Investments and Al Khair 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 Al Khair River are associated (or correlated) with Arab Moltaka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arab Moltaka Investments has no effect on the direction of Al Khair i.e., Al Khair and Arab Moltaka go up and down completely randomly.

Pair Corralation between Al Khair and Arab Moltaka

Assuming the 90 days trading horizon Al Khair is expected to generate 1.97 times less return on investment than Arab Moltaka. But when comparing it to its historical volatility, Al Khair River is 1.09 times less risky than Arab Moltaka. It trades about 0.04 of its potential returns per unit of risk. Arab Moltaka Investments is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  243.00  in Arab Moltaka Investments on December 21, 2024 and sell it today you would earn a total of  20.00  from holding Arab Moltaka Investments or generate 8.23% return on investment over 90 days.

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

Al Khair River  vs.  Arab Moltaka Investments

Al Khair River

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair River are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Al Khair is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Arab Moltaka Investments

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arab Moltaka Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arab Moltaka may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Al Khair and Arab Moltaka

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

The idea behind Al Khair River and Arab Moltaka Investments 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.