Correlation Between Amana Income and Amana Growth

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

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

Diversification Opportunities for Amana Income and Amana Growth

0.67

Correlation Coefficient

Amana Income  Amana Growth

Poor diversification

The 3 months correlation between Amana and Amana is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Amana Income Fund and Amana Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Growth and Amana Income 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 Amana Income Fund are associated (or correlated) with Amana Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Growth has no effect on the direction of Amana Income i.e., Amana Income and Amana Growth go up and down completely randomly.

Pair Corralation between Amana Income and Amana Growth

Assuming the 90 days horizon Amana Income Fund is expected to under-perform the Amana Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Amana Income Fund is 1.34 times less risky than Amana Growth. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Amana Growth Fund is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,459  in Amana Growth Fund on August 30, 2024 and sell it today you would lose (57.00) from holding Amana Growth Fund or give up 0.67% of portfolio value over 90 days.

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

Amana Income Fund  vs.  Amana Growth Fund

Amana Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amana Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Amana Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amana Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amana Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Amana Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amana Income and Amana Growth

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

The idea behind Amana Income Fund and Amana Growth 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.