Correlation Between Arab Aluminum and A Capital
Can any of the company-specific risk be diversified away by investing in both Arab Aluminum and A Capital 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 Arab Aluminum and A Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arab Aluminum and A Capital Holding, you can compare the effects of market volatilities on Arab Aluminum and A Capital 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 Arab Aluminum with a short position of A Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arab Aluminum and A Capital.
Diversification Opportunities for Arab Aluminum and A Capital
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arab and ACAP is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Arab Aluminum and A Capital Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A Capital Holding and Arab Aluminum 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 Arab Aluminum are associated (or correlated) with A Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A Capital Holding has no effect on the direction of Arab Aluminum i.e., Arab Aluminum and A Capital go up and down completely randomly.
Pair Corralation between Arab Aluminum and A Capital
Assuming the 90 days trading horizon Arab Aluminum is expected to under-perform the A Capital. But the stock apears to be less risky and, when comparing its historical volatility, Arab Aluminum is 1.13 times less risky than A Capital. The stock trades about -0.02 of its potential returns per unit of risk. The A Capital Holding is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 256.00 in A Capital Holding on September 12, 2024 and sell it today you would earn a total of 26.00 from holding A Capital Holding or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arab Aluminum vs. A Capital Holding
Performance |
| Timeline |
| Arab Aluminum |
| A Capital Holding |
Arab Aluminum and A Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arab Aluminum and A Capital
The main advantage of trading using opposite Arab Aluminum and A Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arab Aluminum position performs unexpectedly, A Capital 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 A Capital will offset losses from the drop in A Capital's long position.| Arab Aluminum vs. Paint Chemicals Industries | Arab Aluminum vs. Reacap Financial Investments | Arab Aluminum vs. Egyptians For Investment | Arab Aluminum vs. Misr Oils Soap |
| A Capital vs. Paint Chemicals Industries | A Capital vs. Reacap Financial Investments | A Capital vs. Egyptians For Investment | A Capital vs. Misr Oils Soap |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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