Correlation Between Silkbank and Al Shaheer

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

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

Diversification Opportunities for Silkbank and Al Shaheer

0.12

Correlation Coefficient

Silkbank  Al Shaheer

Average diversification

The 3 months correlation between Silkbank and ASC is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Silkbank and Al Shaheer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Shaheer and Silkbank 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 Silkbank are associated (or correlated) with Al Shaheer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Shaheer has no effect on the direction of Silkbank i.e., Silkbank and Al Shaheer go up and down completely randomly.

Pair Corralation between Silkbank and Al Shaheer

Assuming the 90 days trading horizon Silkbank is expected to generate 1.17 times more return on investment than Al Shaheer. However, Silkbank is 1.17 times more volatile than Al Shaheer. It trades about 0.07 of its potential returns per unit of risk. Al Shaheer is currently generating about 0.01 per unit of risk. If you would invest  104.00  in Silkbank on December 21, 2024 and sell it today you would earn a total of  11.00  from holding Silkbank or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Silkbank  vs.  Al Shaheer

Silkbank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silkbank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Silkbank sustained solid returns over the last few months and may actually be approaching a breakup point.

Al Shaheer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Al Shaheer has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Al Shaheer is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Silkbank and Al Shaheer

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

The idea behind Silkbank and Al Shaheer 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.