Correlation Between Al Khair and Edita Food

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

Diversification Opportunities for Al Khair and Edita Food

-0.11

Correlation Coefficient

Al Khair  Edita Food

Good diversification

The 3 months correlation between KRDI and Edita is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Al Khair River and Edita Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edita Food Industries 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 Edita Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edita Food Industries has no effect on the direction of Al Khair i.e., Al Khair and Edita Food go up and down completely randomly.

Pair Corralation between Al Khair and Edita Food

Assuming the 90 days trading horizon Al Khair River is expected to generate 1.49 times more return on investment than Edita Food. However, Al Khair is 1.49 times more volatile than Edita Food Industries. It trades about 0.07 of its potential returns per unit of risk. Edita Food Industries is currently generating about 0.08 per unit of risk. If you would invest  29.00  in Al Khair River on September 18, 2024 and sell it today you would earn a total of  30.00  from holding Al Khair River or generate 103.45% 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.  Edita Food Industries

Al Khair River

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair River are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Al Khair reported solid returns over the last few months and may actually be approaching a breakup point.

Edita Food Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edita Food Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Edita Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Al Khair and Edita Food

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

The idea behind Al Khair River and Edita Food Industries 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.

Check out your portfolio center.

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.