Correlation Between Reacap Financial and Al Tawfeek

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

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

Diversification Opportunities for Reacap Financial and Al Tawfeek

0.58

Correlation Coefficient

Reacap Financial  Al Tawfeek

Very weak diversification

The 3 months correlation between Reacap and ATLC is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Reacap Financial Investments and Al Tawfeek Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Tawfeek Leasing and Reacap Financial 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 Reacap Financial Investments are associated (or correlated) with Al Tawfeek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Tawfeek Leasing has no effect on the direction of Reacap Financial i.e., Reacap Financial and Al Tawfeek go up and down completely randomly.

Pair Corralation between Reacap Financial and Al Tawfeek

Assuming the 90 days trading horizon Reacap Financial Investments is expected to generate 0.51 times more return on investment than Al Tawfeek. However, Reacap Financial Investments is 1.97 times less risky than Al Tawfeek. It trades about -0.05 of its potential returns per unit of risk. Al Tawfeek Leasing is currently generating about -0.15 per unit of risk. If you would invest  684.00  in Reacap Financial Investments on December 4, 2024 and sell it today you would lose (25.00) from holding Reacap Financial Investments or give up 3.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.0%
Values	Daily Returns

Reacap Financial Investments  vs.  Al Tawfeek Leasing

Reacap Financial Inv

Risk-Adjusted Performance

Very Weak

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

Al Tawfeek Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Al Tawfeek Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Reacap Financial and Al Tawfeek

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

The idea behind Reacap Financial Investments and Al Tawfeek Leasing 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.