Correlation Between Al Baraka and Suez Canal

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

By analyzing existing cross correlation between Al Baraka Bank and Suez Canal Bank, you can compare the effects of market volatilities on Al Baraka and Suez Canal 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 Baraka with a short position of Suez Canal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Baraka and Suez Canal.

Diversification Opportunities for Al Baraka and Suez Canal

-0.16

Correlation Coefficient

Al Baraka  Suez Canal

Good diversification

The 3 months correlation between SAUD and Suez is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Al Baraka Bank and Suez Canal Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suez Canal Bank and Al Baraka 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 Baraka Bank are associated (or correlated) with Suez Canal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suez Canal Bank has no effect on the direction of Al Baraka i.e., Al Baraka and Suez Canal go up and down completely randomly.

Pair Corralation between Al Baraka and Suez Canal

Assuming the 90 days trading horizon Al Baraka Bank is expected to generate 0.28 times more return on investment than Suez Canal. However, Al Baraka Bank is 3.62 times less risky than Suez Canal. It trades about -0.25 of its potential returns per unit of risk. Suez Canal Bank is currently generating about -0.29 per unit of risk. If you would invest  1,290  in Al Baraka Bank on October 23, 2024 and sell it today you would lose (82.00) from holding Al Baraka Bank or give up 6.36% of portfolio value over 90 days.

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

Al Baraka Bank  vs.  Suez Canal Bank

Al Baraka Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Al Baraka Bank 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Suez Canal Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Suez Canal Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Suez Canal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Baraka and Suez Canal

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

The idea behind Al Baraka Bank and Suez Canal 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.