Correlation Between Arabia Investments and Ismailia Development

Can any of the company-specific risk be diversified away by investing in both Arabia Investments and Ismailia Development 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 Arabia Investments and Ismailia Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arabia Investments Holding and Ismailia Development and, you can compare the effects of market volatilities on Arabia Investments and Ismailia Development 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 Arabia Investments with a short position of Ismailia Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arabia Investments and Ismailia Development.

Diversification Opportunities for Arabia Investments and Ismailia Development

0.53

Correlation Coefficient

Arabia Investments  Ismailia Development

Very weak diversification

The 3 months correlation between Arabia and Ismailia is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Arabia Investments Holding and Ismailia Development and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ismailia Development and and Arabia Investments 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 Arabia Investments Holding are associated (or correlated) with Ismailia Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ismailia Development and has no effect on the direction of Arabia Investments i.e., Arabia Investments and Ismailia Development go up and down completely randomly.

Pair Corralation between Arabia Investments and Ismailia Development

Assuming the 90 days trading horizon Arabia Investments Holding is expected to generate 0.9 times more return on investment than Ismailia Development. However, Arabia Investments Holding is 1.11 times less risky than Ismailia Development. It trades about -0.07 of its potential returns per unit of risk. Ismailia Development and is currently generating about -0.11 per unit of risk. If you would invest  54.00  in Arabia Investments Holding on September 12, 2024 and sell it today you would lose (4.00) from holding Arabia Investments Holding or give up 7.41% of portfolio value over 90 days.

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

Arabia Investments Holding  vs.  Ismailia Development and

Arabia Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arabia Investments Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Ismailia Development and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ismailia Development and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Arabia Investments and Ismailia Development

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

The idea behind Arabia Investments Holding and Ismailia Development and 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.