Correlation Between Al Arafa and Orascom Construction

Can any of the company-specific risk be diversified away by investing in both Al Arafa and Orascom Construction 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 Orascom Construction 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 Orascom Construction PLC, you can compare the effects of market volatilities on Al Arafa and Orascom Construction 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 Orascom Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Al Arafa and Orascom Construction.

Diversification Opportunities for Al Arafa and Orascom Construction

0.0

Correlation Coefficient

Al Arafa  Orascom Construction

Pay attention - limited upside

The 3 months correlation between AIVCB and Orascom is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Al Arafa Investment and Orascom Construction PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orascom Construction PLC 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 Orascom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orascom Construction PLC has no effect on the direction of Al Arafa i.e., Al Arafa and Orascom Construction go up and down completely randomly.

Pair Corralation between Al Arafa and Orascom Construction

If you would invest  27,220  in Orascom Construction PLC on September 25, 2024 and sell it today you would earn a total of  1,269  from holding Orascom Construction PLC or generate 4.66% return on investment over 90 days.

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

Al Arafa Investment  vs.  Orascom Construction PLC

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.

Orascom Construction PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orascom Construction PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Orascom Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Al Arafa and Orascom Construction

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

The idea behind Al Arafa Investment and Orascom Construction PLC 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.