Correlation Between Shaheen Insurance and Al Ghazi

Can any of the company-specific risk be diversified away by investing in both Shaheen Insurance and Al Ghazi 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 Shaheen Insurance and Al Ghazi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shaheen Insurance and Al Ghazi Tractors, you can compare the effects of market volatilities on Shaheen Insurance and Al Ghazi 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 Shaheen Insurance with a short position of Al Ghazi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaheen Insurance and Al Ghazi.

Diversification Opportunities for Shaheen Insurance and Al Ghazi

-0.1

Correlation Coefficient

Shaheen Insurance  Al Ghazi

Good diversification

The 3 months correlation between Shaheen and AGTL is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Shaheen Insurance and Al Ghazi Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Ghazi Tractors and Shaheen Insurance 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 Shaheen Insurance are associated (or correlated) with Al Ghazi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Ghazi Tractors has no effect on the direction of Shaheen Insurance i.e., Shaheen Insurance and Al Ghazi go up and down completely randomly.

Pair Corralation between Shaheen Insurance and Al Ghazi

Assuming the 90 days trading horizon Shaheen Insurance is expected to generate 1.44 times more return on investment than Al Ghazi. However, Shaheen Insurance is 1.44 times more volatile than Al Ghazi Tractors. It trades about 0.09 of its potential returns per unit of risk. Al Ghazi Tractors is currently generating about -0.02 per unit of risk. If you would invest  632.00  in Shaheen Insurance on December 30, 2024 and sell it today you would earn a total of  114.00  from holding Shaheen Insurance or generate 18.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Shaheen Insurance  vs.  Al Ghazi Tractors

Shaheen Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shaheen Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaheen Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Al Ghazi Tractors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Al Ghazi Tractors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Al Ghazi is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shaheen Insurance and Al Ghazi

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

The idea behind Shaheen Insurance and Al Ghazi Tractors 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.