Correlation Between Africa Energy and International Petroleum
Can any of the company-specific risk be diversified away by investing in both Africa Energy and International Petroleum 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 Africa Energy and International Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Africa Energy Corp and International Petroleum, you can compare the effects of market volatilities on Africa Energy and International Petroleum 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 Africa Energy with a short position of International Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Energy and International Petroleum.
Diversification Opportunities for Africa Energy and International Petroleum
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Africa and International is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Africa Energy Corp and International Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Petroleum and Africa Energy 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 Africa Energy Corp are associated (or correlated) with International Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Petroleum has no effect on the direction of Africa Energy i.e., Africa Energy and International Petroleum go up and down completely randomly.
Pair Corralation between Africa Energy and International Petroleum
Assuming the 90 days trading horizon Africa Energy Corp is expected to generate 1.62 times more return on investment than International Petroleum. However, Africa Energy is 1.62 times more volatile than International Petroleum. It trades about -0.05 of its potential returns per unit of risk. International Petroleum is currently generating about -0.12 per unit of risk. If you would invest 23.00 in Africa Energy Corp on August 28, 2024 and sell it today you would lose (3.00) from holding Africa Energy Corp or give up 13.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.46% |
| Values | Daily Returns |
Africa Energy Corp vs. International Petroleum
Performance |
| Timeline |
| Africa Energy Corp |
| International Petroleum |
Africa Energy and International Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Energy and International Petroleum
The main advantage of trading using opposite Africa Energy and International Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Energy position performs unexpectedly, International Petroleum 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 International Petroleum will offset losses from the drop in International Petroleum's long position.| Africa Energy vs. Investment AB Oresund | Africa Energy vs. SolTech Energy Sweden | Africa Energy vs. Upsales Technology AB | Africa Energy vs. Invisio Communications AB |
| International Petroleum vs. SolTech Energy Sweden | International Petroleum vs. Minesto AB | International Petroleum vs. SaltX Technology Holding | International Petroleum vs. Impact Coatings publ |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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