Correlation Between Speed Medical and Arab Dairy

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

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

Diversification Opportunities for Speed Medical and Arab Dairy

0.06

Correlation Coefficient

Speed Medical  Arab Dairy

Significant diversification

The 3 months correlation between Speed and Arab is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Speed Medical and The Arab Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arab Dairy and Speed Medical 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 Speed Medical are associated (or correlated) with Arab Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arab Dairy has no effect on the direction of Speed Medical i.e., Speed Medical and Arab Dairy go up and down completely randomly.

Pair Corralation between Speed Medical and Arab Dairy

Assuming the 90 days trading horizon Speed Medical is expected to generate 1.34 times less return on investment than Arab Dairy. But when comparing it to its historical volatility, Speed Medical is 1.56 times less risky than Arab Dairy. It trades about 0.15 of its potential returns per unit of risk. The Arab Dairy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  288.00  in The Arab Dairy on September 16, 2024 and sell it today you would earn a total of  43.00  from holding The Arab Dairy or generate 14.93% return on investment over 90 days.

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

Speed Medical  vs.  The Arab Dairy

Speed Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Speed Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Speed Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Arab Dairy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Arab Dairy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arab Dairy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Speed Medical and Arab Dairy

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

The idea behind Speed Medical and The Arab Dairy 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..