Correlation Between Al Baraka and Saudi Egyptian

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

Diversification Opportunities for Al Baraka and Saudi Egyptian

-0.6

Correlation Coefficient

Al Baraka  Saudi Egyptian

Excellent diversification

The 3 months correlation between SAUD and Saudi is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Al Baraka Bank and Saudi Egyptian Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saudi Egyptian Investment 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 Saudi Egyptian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saudi Egyptian Investment has no effect on the direction of Al Baraka i.e., Al Baraka and Saudi Egyptian go up and down completely randomly.

Pair Corralation between Al Baraka and Saudi Egyptian

Assuming the 90 days trading horizon Al Baraka Bank is expected to generate 0.79 times more return on investment than Saudi Egyptian. However, Al Baraka Bank is 1.27 times less risky than Saudi Egyptian. It trades about 0.04 of its potential returns per unit of risk. Saudi Egyptian Investment is currently generating about 0.02 per unit of risk. If you would invest  897.00  in Al Baraka Bank on October 27, 2024 and sell it today you would earn a total of  319.00  from holding Al Baraka Bank or generate 35.56% return on investment over 90 days.

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

Al Baraka Bank  vs.  Saudi Egyptian Investment

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.

Saudi Egyptian Investment

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Al Baraka and Saudi Egyptian

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

The idea behind Al Baraka Bank and Saudi Egyptian Investment 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.