Correlation Between Saudi Egyptian and Al Baraka

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

Diversification Opportunities for Saudi Egyptian and Al Baraka

0.23

Correlation Coefficient

Saudi Egyptian  Al Baraka

Modest diversification

The 3 months correlation between Saudi and SAUD is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Saudi Egyptian Investment and Al Baraka Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Baraka Bank 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 Al Baraka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Baraka Bank has no effect on the direction of Saudi Egyptian i.e., Saudi Egyptian and Al Baraka go up and down completely randomly.

Pair Corralation between Saudi Egyptian and Al Baraka

Assuming the 90 days trading horizon Saudi Egyptian Investment is expected to generate 4.31 times more return on investment than Al Baraka. However, Saudi Egyptian is 4.31 times more volatile than Al Baraka Bank. It trades about 0.24 of its potential returns per unit of risk. Al Baraka Bank is currently generating about -0.42 per unit of risk. If you would invest  6,482  in Saudi Egyptian Investment on October 12, 2024 and sell it today you would earn a total of  1,327  from holding Saudi Egyptian Investment or generate 20.47% return on investment over 90 days.

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

Saudi Egyptian Investment  vs.  Al Baraka Bank

Saudi Egyptian Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saudi Egyptian Investment are ranked lower than 9 (%) 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.

Al Baraka Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Al Baraka Bank are ranked lower than 2 (%) 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.

Pair Trading with Saudi Egyptian and Al Baraka

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

The idea behind Saudi Egyptian Investment and Al Baraka 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.

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.