Correlation Between Arabian Food and Paint Chemicals

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

By analyzing existing cross correlation between Arabian Food Industries and Paint Chemicals Industries, you can compare the effects of market volatilities on Arabian Food and Paint Chemicals 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 Arabian Food with a short position of Paint Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arabian Food and Paint Chemicals.

Diversification Opportunities for Arabian Food and Paint Chemicals

0.0

Correlation Coefficient

Arabian Food  Paint Chemicals

Pay attention - limited upside

The 3 months correlation between Arabian and Paint is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Arabian Food Industries and Paint Chemicals Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paint Chemicals Indu and Arabian Food 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 Arabian Food Industries are associated (or correlated) with Paint Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paint Chemicals Indu has no effect on the direction of Arabian Food i.e., Arabian Food and Paint Chemicals go up and down completely randomly.

Pair Corralation between Arabian Food and Paint Chemicals

If you would invest  1,470  in Arabian Food Industries on September 12, 2024 and sell it today you would earn a total of  1,237  from holding Arabian Food Industries or generate 84.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.08%
Values	Daily Returns

Arabian Food Industries  vs.  Paint Chemicals Industries

Arabian Food Industries

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arabian Food Industries are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Arabian Food reported solid returns over the last few months and may actually be approaching a breakup point.

Paint Chemicals Indu

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Arabian Food and Paint Chemicals

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

The idea behind Arabian Food Industries and Paint Chemicals Industries 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.