Correlation Between Al Baraka and International Agricultural

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

Diversification Opportunities for Al Baraka and International Agricultural

0.81

Correlation Coefficient

Al Baraka  International Agricultural

Very poor diversification

The 3 months correlation between SAUD and International is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Al Baraka Bank and International Agricultural Pro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Agricultural 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 International Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Agricultural has no effect on the direction of Al Baraka i.e., Al Baraka and International Agricultural go up and down completely randomly.

Pair Corralation between Al Baraka and International Agricultural

Assuming the 90 days trading horizon Al Baraka is expected to generate 7.19 times less return on investment than International Agricultural. But when comparing it to its historical volatility, Al Baraka Bank is 1.18 times less risky than International Agricultural. It trades about 0.04 of its potential returns per unit of risk. International Agricultural Products is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,432  in International Agricultural Products on October 8, 2024 and sell it today you would earn a total of  462.00  from holding International Agricultural Products or generate 32.26% return on investment over 90 days.

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

Al Baraka Bank  vs.  International Agricultural Pro

Al Baraka Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Al Baraka Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Al Baraka is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

International Agricultural

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Agricultural Products are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, International Agricultural reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Baraka and International Agricultural

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

The idea behind Al Baraka Bank and International Agricultural Products 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.