Correlation Between Amana Participation and Amana Developing
Can any of the company-specific risk be diversified away by investing in both Amana Participation and Amana Developing 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 Participation and Amana Developing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amana Participation Fund and Amana Developing World, you can compare the effects of market volatilities on Amana Participation and Amana Developing 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 Participation with a short position of Amana Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amana Participation and Amana Developing.
Diversification Opportunities for Amana Participation and Amana Developing
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amana and Amana is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Amana Participation Fund and Amana Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Developing World and Amana Participation 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 Participation Fund are associated (or correlated) with Amana Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Developing World has no effect on the direction of Amana Participation i.e., Amana Participation and Amana Developing go up and down completely randomly.
Pair Corralation between Amana Participation and Amana Developing
Assuming the 90 days horizon Amana Participation Fund is expected to generate 0.18 times more return on investment than Amana Developing. However, Amana Participation Fund is 5.62 times less risky than Amana Developing. It trades about 0.04 of its potential returns per unit of risk. Amana Developing World is currently generating about -0.07 per unit of risk. If you would invest 976.00 in Amana Participation Fund on September 5, 2024 and sell it today you would earn a total of 1.00 from holding Amana Participation Fund or generate 0.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Amana Participation Fund vs. Amana Developing World
Performance |
| Timeline |
| Amana Participation |
| Amana Developing World |
Amana Participation and Amana Developing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amana Participation and Amana Developing
The main advantage of trading using opposite Amana Participation and Amana Developing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amana Participation position performs unexpectedly, Amana Developing 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 Developing will offset losses from the drop in Amana Developing's long position.| Amana Participation vs. Amana Developing World | Amana Participation vs. Amana Growth Fund | Amana Participation vs. Amana Developing World | Amana Participation vs. Amana Income Fund |
| Amana Developing vs. Amana Income Fund | Amana Developing vs. Amana Growth Fund | Amana Developing vs. Amana Participation Fund | Amana Developing vs. Azzad Ethical Fund |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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