Correlation Between Al Arafa and Nile City

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

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

Diversification Opportunities for Al Arafa and Nile City

1.0

Correlation Coefficient

Al Arafa  Nile City

No risk reduction

The 3 months correlation between AIVCB and Nile is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Al Arafa Investment and Nile City Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nile City Investment and Al Arafa 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 Al Arafa Investment are associated (or correlated) with Nile City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nile City Investment has no effect on the direction of Al Arafa i.e., Al Arafa and Nile City go up and down completely randomly.

Pair Corralation between Al Arafa and Nile City

If you would invest  34,428  in Nile City Investment on September 18, 2024 and sell it today you would earn a total of  0.00  from holding Nile City Investment or generate 0.0% return on investment over 90 days.

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

Al Arafa Investment  vs.  Nile City Investment

Al Arafa Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Al Arafa Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Al Arafa is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Nile City Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nile City Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Nile City is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Al Arafa and Nile City

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

The idea behind Al Arafa Investment and Nile City Investment 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.