Correlation Between Sharkia National and Arabia Investments

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

By analyzing existing cross correlation between Sharkia National Food and Arabia Investments Holding, you can compare the effects of market volatilities on Sharkia National and Arabia Investments 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 Sharkia National with a short position of Arabia Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sharkia National and Arabia Investments.

Diversification Opportunities for Sharkia National and Arabia Investments

0.28

Correlation Coefficient

Sharkia National  Arabia Investments

Modest diversification

The 3 months correlation between Sharkia and Arabia is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sharkia National Food and Arabia Investments Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arabia Investments and Sharkia National 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 Sharkia National Food are associated (or correlated) with Arabia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arabia Investments has no effect on the direction of Sharkia National i.e., Sharkia National and Arabia Investments go up and down completely randomly.

Pair Corralation between Sharkia National and Arabia Investments

Assuming the 90 days trading horizon Sharkia National Food is expected to generate 1.49 times more return on investment than Arabia Investments. However, Sharkia National is 1.49 times more volatile than Arabia Investments Holding. It trades about 0.42 of its potential returns per unit of risk. Arabia Investments Holding is currently generating about 0.06 per unit of risk. If you would invest  292.00  in Sharkia National Food on October 25, 2024 and sell it today you would earn a total of  318.00  from holding Sharkia National Food or generate 108.9% return on investment over 90 days.

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

Sharkia National Food  vs.  Arabia Investments Holding

Sharkia National Food

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sharkia National Food are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Sharkia National reported solid returns over the last few months and may actually be approaching a breakup point.

Arabia Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arabia Investments Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arabia Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sharkia National and Arabia Investments

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

The idea behind Sharkia National Food and Arabia Investments Holding 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.