Correlation Between Amana Participation and Amana Income
Can any of the company-specific risk be diversified away by investing in both Amana Participation and Amana Income 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 Income 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 Income Fund, you can compare the effects of market volatilities on Amana Participation and Amana Income 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 Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amana Participation and Amana Income.
Diversification Opportunities for Amana Participation and Amana Income
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Amana and Amana is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Amana Participation Fund and Amana Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Income 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 Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Income has no effect on the direction of Amana Participation i.e., Amana Participation and Amana Income go up and down completely randomly.
Pair Corralation between Amana Participation and Amana Income
Assuming the 90 days horizon Amana Participation is expected to generate 27.61 times less return on investment than Amana Income. But when comparing it to its historical volatility, Amana Participation Fund is 4.99 times less risky than Amana Income. It trades about 0.04 of its potential returns per unit of risk. Amana Income Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 6,740 in Amana Income Fund on September 5, 2024 and sell it today you would earn a total of 201.00 from holding Amana Income Fund or generate 2.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Amana Participation Fund vs. Amana Income Fund
Performance |
| Timeline |
| Amana Participation |
| Amana Income |
Amana Participation and Amana Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amana Participation and Amana Income
The main advantage of trading using opposite Amana Participation and Amana Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amana Participation position performs unexpectedly, Amana Income 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 Income will offset losses from the drop in Amana Income'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 Income vs. Amana Growth Fund | Amana Income vs. Amana Developing World | Amana Income vs. Amana Developing World | Amana Income vs. Amana Income 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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