Correlation Between Arab Moltaka and El Nasr

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

By analyzing existing cross correlation between Arab Moltaka Investments and El Nasr Clothes, you can compare the effects of market volatilities on Arab Moltaka and El Nasr 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 Arab Moltaka with a short position of El Nasr. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arab Moltaka and El Nasr.

Diversification Opportunities for Arab Moltaka and El Nasr

0.55

Correlation Coefficient

Arab Moltaka  El Nasr

Very weak diversification

The 3 months correlation between Arab and KABO is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Arab Moltaka Investments and El Nasr Clothes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Nasr Clothes and Arab Moltaka 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 Arab Moltaka Investments are associated (or correlated) with El Nasr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Nasr Clothes has no effect on the direction of Arab Moltaka i.e., Arab Moltaka and El Nasr go up and down completely randomly.

Pair Corralation between Arab Moltaka and El Nasr

Assuming the 90 days trading horizon Arab Moltaka is expected to generate 2.12 times less return on investment than El Nasr. But when comparing it to its historical volatility, Arab Moltaka Investments is 1.04 times less risky than El Nasr. It trades about 0.12 of its potential returns per unit of risk. El Nasr Clothes is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  257.00  in El Nasr Clothes on September 17, 2024 and sell it today you would earn a total of  134.00  from holding El Nasr Clothes or generate 52.14% return on investment over 90 days.

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

Arab Moltaka Investments  vs.  El Nasr Clothes

Arab Moltaka Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arab Moltaka Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arab Moltaka reported solid returns over the last few months and may actually be approaching a breakup point.

El Nasr Clothes

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in El Nasr Clothes are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, El Nasr reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arab Moltaka and El Nasr

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

The idea behind Arab Moltaka Investments and El Nasr Clothes 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.