Correlation Between Azzad Wise and Amana Income

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

By analyzing existing cross correlation between Azzad Wise Capital and Amana Income Fund, you can compare the effects of market volatilities on Azzad Wise and Amana Income 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 Azzad Wise with a short position of Amana Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azzad Wise and Amana Income.

Diversification Opportunities for Azzad Wise and Amana Income

0.6

Correlation Coefficient

Azzad Wise  Amana Income

Poor diversification

The 3 months correlation between Azzad and Amana is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Azzad Wise Capital and Amana Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Income and Azzad Wise 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 Azzad Wise Capital are associated (or correlated) with Amana Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Income has no effect on the direction of Azzad Wise i.e., Azzad Wise and Amana Income go up and down completely randomly.

Pair Corralation between Azzad Wise and Amana Income

Assuming the 90 days horizon Azzad Wise Capital is expected to generate 0.09 times more return on investment than Amana Income. However, Azzad Wise Capital is 11.25 times less risky than Amana Income. It trades about 0.05 of its potential returns per unit of risk. Amana Income Fund is currently generating about -0.08 per unit of risk. If you would invest  1,074  in Azzad Wise Capital on December 4, 2024 and sell it today you would earn a total of  3.00  from holding Azzad Wise Capital or generate 0.28% return on investment over 90 days.

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

Azzad Wise Capital  vs.  Amana Income Fund

Azzad Wise Capital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Azzad Wise Capital are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Azzad Wise is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amana Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amana Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Amana Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Azzad Wise and Amana Income

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

The idea behind Azzad Wise Capital and Amana Income Fund 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.