Correlation Between Al Baraka and Natural Gas

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

Diversification Opportunities for Al Baraka and Natural Gas

-0.31

Correlation Coefficient

Al Baraka  Natural Gas

Very good diversification

The 3 months correlation between SAUD and Natural is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Al Baraka Bank and Natural Gas Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Gas Mining 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 Natural Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Gas Mining has no effect on the direction of Al Baraka i.e., Al Baraka and Natural Gas go up and down completely randomly.

Pair Corralation between Al Baraka and Natural Gas

Assuming the 90 days trading horizon Al Baraka Bank is expected to under-perform the Natural Gas. But the stock apears to be less risky and, when comparing its historical volatility, Al Baraka Bank is 1.29 times less risky than Natural Gas. The stock trades about -0.12 of its potential returns per unit of risk. The Natural Gas Mining is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,102  in Natural Gas Mining on October 26, 2024 and sell it today you would lose (72.00) from holding Natural Gas Mining or give up 1.76% 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.  Natural Gas Mining

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.

Natural Gas Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Al Baraka and Natural Gas

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

The idea behind Al Baraka Bank and Natural Gas Mining 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.