Correlation Between Reacap Financial and Al Baraka

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

Diversification Opportunities for Reacap Financial and Al Baraka

0.79

Correlation Coefficient

Reacap Financial  Al Baraka

Poor diversification

The 3 months correlation between Reacap and SAUD is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Reacap Financial Investments and Al Baraka Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Baraka Bank 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 Baraka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Baraka Bank has no effect on the direction of Reacap Financial i.e., Reacap Financial and Al Baraka go up and down completely randomly.

Pair Corralation between Reacap Financial and Al Baraka

Assuming the 90 days trading horizon Reacap Financial Investments is expected to under-perform the Al Baraka. In addition to that, Reacap Financial is 1.22 times more volatile than Al Baraka Bank. It trades about -0.3 of its total potential returns per unit of risk. Al Baraka Bank is currently generating about -0.16 per unit of volatility. If you would invest  1,415  in Al Baraka Bank on September 16, 2024 and sell it today you would lose (74.00) from holding Al Baraka Bank or give up 5.23% of portfolio value over 90 days.

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

Reacap Financial Investments  vs.  Al Baraka Bank

Reacap Financial Inv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reacap Financial Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Reacap Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Al Baraka Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Al Baraka Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Al Baraka reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reacap Financial and Al Baraka

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

The idea behind Reacap Financial Investments and Al Baraka Bank 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.