Correlation Between Al Khair and Iron

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

Diversification Opportunities for Al Khair and Iron

0.1

Correlation Coefficient

Al Khair  Iron

Average diversification

The 3 months correlation between KRDI and Iron is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Al Khair River and Iron And Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron And Steel 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 Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron And Steel has no effect on the direction of Al Khair i.e., Al Khair and Iron go up and down completely randomly.

Pair Corralation between Al Khair and Iron

Assuming the 90 days trading horizon Al Khair is expected to generate 1.65 times less return on investment than Iron. But when comparing it to its historical volatility, Al Khair River is 1.23 times less risky than Iron. It trades about 0.07 of its potential returns per unit of risk. Iron And Steel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  121.00  in Iron And Steel on September 18, 2024 and sell it today you would earn a total of  301.00  from holding Iron And Steel or generate 248.76% return on investment over 90 days.

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

Al Khair River  vs.  Iron And Steel

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.

Iron And Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron And Steel 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.

Pair Trading with Al Khair and Iron

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

The idea behind Al Khair River and Iron And Steel 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.