Correlation Between Iman Fund and Amana Participation

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

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

Diversification Opportunities for Iman Fund and Amana Participation

-0.25

Correlation Coefficient

Iman Fund  Amana Participation

Very good diversification

The 3 months correlation between Iman and Amana is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Iman Fund Class and Amana Participation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Participation and Iman Fund 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 Iman Fund Class are associated (or correlated) with Amana Participation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Participation has no effect on the direction of Iman Fund i.e., Iman Fund and Amana Participation go up and down completely randomly.

Pair Corralation between Iman Fund and Amana Participation

Assuming the 90 days horizon Iman Fund Class is expected to generate 7.38 times more return on investment than Amana Participation. However, Iman Fund is 7.38 times more volatile than Amana Participation Fund. It trades about 0.14 of its potential returns per unit of risk. Amana Participation Fund is currently generating about 0.03 per unit of risk. If you would invest  1,547  in Iman Fund Class on September 1, 2024 and sell it today you would earn a total of  112.00  from holding Iman Fund Class or generate 7.24% return on investment over 90 days.

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

Iman Fund Class  vs.  Amana Participation Fund

Iman Fund Class

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iman Fund Class are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Iman Fund may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Amana Participation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amana Participation Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Amana Participation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Iman Fund and Amana Participation

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

The idea behind Iman Fund Class and Amana Participation 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.