Correlation Between Orascom Investment and Arabia Investments

Can any of the company-specific risk be diversified away by investing in both Orascom Investment and Arabia Investments 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 Orascom Investment and Arabia Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Orascom Investment Holding and Arabia Investments Holding, you can compare the effects of market volatilities on Orascom Investment and Arabia Investments 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 Orascom Investment with a short position of Arabia Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orascom Investment and Arabia Investments.

Diversification Opportunities for Orascom Investment and Arabia Investments

0.33

Correlation Coefficient

Orascom Investment  Arabia Investments

Weak diversification

The 3 months correlation between Orascom and Arabia is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Orascom Investment Holding and Arabia Investments Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arabia Investments and Orascom Investment 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 Orascom Investment Holding are associated (or correlated) with Arabia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arabia Investments has no effect on the direction of Orascom Investment i.e., Orascom Investment and Arabia Investments go up and down completely randomly.

Pair Corralation between Orascom Investment and Arabia Investments

Assuming the 90 days trading horizon Orascom Investment Holding is expected to generate 1.38 times more return on investment than Arabia Investments. However, Orascom Investment is 1.38 times more volatile than Arabia Investments Holding. It trades about 0.34 of its potential returns per unit of risk. Arabia Investments Holding is currently generating about -0.1 per unit of risk. If you would invest  45.00  in Orascom Investment Holding on September 22, 2024 and sell it today you would earn a total of  11.00  from holding Orascom Investment Holding or generate 24.44% return on investment over 90 days.

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

Orascom Investment Holding  vs.  Arabia Investments Holding

Orascom Investment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orascom Investment Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Orascom Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Arabia Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arabia Investments Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Arabia Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Orascom Investment and Arabia Investments

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

The idea behind Orascom Investment Holding and Arabia Investments 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.