Correlation Between United Bank and Al Khair

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

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

Diversification Opportunities for United Bank and Al Khair

-0.39

Correlation Coefficient

United Bank  Al Khair

Very good diversification

The 3 months correlation between United and KRDI is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding The United Bank and Al Khair River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Khair River and United Bank 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 The United Bank are associated (or correlated) with Al Khair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Khair River has no effect on the direction of United Bank i.e., United Bank and Al Khair go up and down completely randomly.

Pair Corralation between United Bank and Al Khair

Assuming the 90 days trading horizon The United Bank is expected to generate 0.33 times more return on investment than Al Khair. However, The United Bank is 3.05 times less risky than Al Khair. It trades about 0.06 of its potential returns per unit of risk. Al Khair River is currently generating about -0.05 per unit of risk. If you would invest  1,429  in The United Bank on October 9, 2024 and sell it today you would earn a total of  11.00  from holding The United Bank or generate 0.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.48%
Values	Daily Returns

The United Bank  vs.  Al Khair River

United Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The United Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, United Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Al Khair River

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Al Khair River are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Al Khair may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with United Bank and Al Khair

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

The idea behind The United Bank and Al Khair River 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.