Correlation Between Al Khair and Orascom Financial

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

Diversification Opportunities for Al Khair and Orascom Financial

0.68

Correlation Coefficient

Al Khair  Orascom Financial

Poor diversification

The 3 months correlation between KRDI and Orascom is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Al Khair River and Orascom Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orascom Financial Holding 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 Orascom Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orascom Financial Holding has no effect on the direction of Al Khair i.e., Al Khair and Orascom Financial go up and down completely randomly.

Pair Corralation between Al Khair and Orascom Financial

Assuming the 90 days trading horizon Al Khair is expected to generate 2.02 times less return on investment than Orascom Financial. But when comparing it to its historical volatility, Al Khair River is 1.27 times less risky than Orascom Financial. It trades about 0.08 of its potential returns per unit of risk. Orascom Financial Holding is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Orascom Financial Holding on September 16, 2024 and sell it today you would earn a total of  7.00  from holding Orascom Financial Holding or generate 21.21% return on investment over 90 days.

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

Al Khair River  vs.  Orascom Financial Holding

Al Khair River

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair River are ranked lower than 6 (%) 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.

Orascom Financial Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orascom Financial Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Orascom Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Khair and Orascom Financial

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

The idea behind Al Khair River and Orascom Financial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.