Correlation Between Azzad Ethical and Amana Participation

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

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

Diversification Opportunities for Azzad Ethical and Amana Participation

-0.08

Correlation Coefficient

Azzad Ethical  Amana Participation

Good diversification

The 3 months correlation between Azzad and Amana is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Azzad Ethical Fund and Amana Participation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Participation and Azzad Ethical 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 Ethical Fund are associated (or correlated) with Amana Participation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Participation has no effect on the direction of Azzad Ethical i.e., Azzad Ethical and Amana Participation go up and down completely randomly.

Pair Corralation between Azzad Ethical and Amana Participation

Assuming the 90 days horizon Azzad Ethical Fund is expected to generate 9.13 times more return on investment than Amana Participation. However, Azzad Ethical is 9.13 times more volatile than Amana Participation Fund. It trades about 0.15 of its potential returns per unit of risk. Amana Participation Fund is currently generating about 0.03 per unit of risk. If you would invest  1,658  in Azzad Ethical Fund on September 1, 2024 and sell it today you would earn a total of  158.00  from holding Azzad Ethical Fund or generate 9.53% return on investment over 90 days.

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

Azzad Ethical Fund  vs.  Amana Participation Fund

Azzad Ethical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Azzad Ethical Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Azzad Ethical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Amana Participation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amana Participation Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Amana Participation 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 Ethical and Amana Participation

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

The idea behind Azzad Ethical Fund and Amana Participation 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.