Correlation Between Reacap Financial and Al Khair

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

Diversification Opportunities for Reacap Financial and Al Khair

-0.29

Correlation Coefficient

Reacap Financial  Al Khair

Very good diversification

The 3 months correlation between Reacap and KRDI is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Reacap Financial Investments and Al Khair River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Khair River 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 Khair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Khair River has no effect on the direction of Reacap Financial i.e., Reacap Financial and Al Khair go up and down completely randomly.

Pair Corralation between Reacap Financial and Al Khair

Assuming the 90 days trading horizon Reacap Financial is expected to generate 1.24 times less return on investment than Al Khair. But when comparing it to its historical volatility, Reacap Financial Investments is 1.49 times less risky than Al Khair. It trades about 0.09 of its potential returns per unit of risk. Al Khair River is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Al Khair River on December 4, 2024 and sell it today you would earn a total of  33.00  from holding Al Khair River or generate 126.92% return on investment over 90 days.

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

Reacap Financial Investments  vs.  Al Khair River

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 Khair River

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair River are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Al Khair may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Reacap Financial and Al Khair

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

The idea behind Reacap Financial Investments and Al Khair River 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.