Correlation Between Amana Participation and Iman Fund

Can any of the company-specific risk be diversified away by investing in both Amana Participation and Iman Fund 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 Iman Fund 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 Iman Fund Class, you can compare the effects of market volatilities on Amana Participation and Iman Fund 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 Iman Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amana Participation and Iman Fund.

Diversification Opportunities for Amana Participation and Iman Fund

0.85

Correlation Coefficient

Amana Participation  Iman Fund

Very poor diversification

The 3 months correlation between Amana and Iman is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Amana Participation Fund and Iman Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iman Fund Class 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 Iman Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iman Fund Class has no effect on the direction of Amana Participation i.e., Amana Participation and Iman Fund go up and down completely randomly.

Pair Corralation between Amana Participation and Iman Fund

Assuming the 90 days horizon Amana Participation is expected to generate 3.7 times less return on investment than Iman Fund. But when comparing it to its historical volatility, Amana Participation Fund is 9.09 times less risky than Iman Fund. It trades about 0.14 of its potential returns per unit of risk. Iman Fund Class is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,487  in Iman Fund Class on February 12, 2024 and sell it today you would earn a total of  16.00  from holding Iman Fund Class or generate 1.08% return on investment over 90 days.

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

Amana Participation Fund  vs.  Iman Fund Class

Amana Participation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amana Participation Fund are ranked lower than 4 (%) 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.

Iman Fund Class

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iman Fund Class are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Iman Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amana Participation and Iman Fund

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

The idea behind Amana Participation Fund and Iman Fund Class 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..