Correlation Between Saudi Egyptian and El Ahli

Can any of the company-specific risk be diversified away by investing in both Saudi Egyptian and El Ahli 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 Saudi Egyptian and El Ahli into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Saudi Egyptian Investment and El Ahli Investment, you can compare the effects of market volatilities on Saudi Egyptian and El Ahli 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 Saudi Egyptian with a short position of El Ahli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saudi Egyptian and El Ahli.

Diversification Opportunities for Saudi Egyptian and El Ahli

0.39

Correlation Coefficient

Saudi Egyptian  El Ahli

Weak diversification

The 3 months correlation between Saudi and AFDI is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Saudi Egyptian Investment and El Ahli Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Ahli Investment and Saudi Egyptian 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 Saudi Egyptian Investment are associated (or correlated) with El Ahli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Ahli Investment has no effect on the direction of Saudi Egyptian i.e., Saudi Egyptian and El Ahli go up and down completely randomly.

Pair Corralation between Saudi Egyptian and El Ahli

Assuming the 90 days trading horizon Saudi Egyptian Investment is expected to generate 1.26 times more return on investment than El Ahli. However, Saudi Egyptian is 1.26 times more volatile than El Ahli Investment. It trades about -0.01 of its potential returns per unit of risk. El Ahli Investment is currently generating about -0.03 per unit of risk. If you would invest  6,656  in Saudi Egyptian Investment on September 15, 2024 and sell it today you would lose (174.00) from holding Saudi Egyptian Investment or give up 2.61% of portfolio value over 90 days.

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

Saudi Egyptian Investment  vs.  El Ahli Investment

Saudi Egyptian Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

El Ahli Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Saudi Egyptian and El Ahli

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

The idea behind Saudi Egyptian Investment and El Ahli 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.