Correlation Between Unity Foods and Al Ghazi

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

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

Diversification Opportunities for Unity Foods and Al Ghazi

0.68

Correlation Coefficient

Unity Foods  Al Ghazi

Poor diversification

The 3 months correlation between Unity and AGTL is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Unity Foods 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 Unity Foods 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 Unity Foods 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 Unity Foods i.e., Unity Foods and Al Ghazi go up and down completely randomly.

Pair Corralation between Unity Foods and Al Ghazi

Assuming the 90 days trading horizon Unity Foods is expected to under-perform the Al Ghazi. But the stock apears to be less risky and, when comparing its historical volatility, Unity Foods is 1.64 times less risky than Al Ghazi. The stock trades about -0.17 of its potential returns per unit of risk. The Al Ghazi Tractors is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  56,345  in Al Ghazi Tractors on December 30, 2024 and sell it today you would lose (3,094) from holding Al Ghazi Tractors or give up 5.49% of portfolio value over 90 days.

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

Unity Foods  vs.  Al Ghazi Tractors

Unity Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unity Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 Unity Foods and Al Ghazi

The main advantage of trading using opposite Unity Foods and Al Ghazi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unity Foods 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 Unity Foods 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.