Correlation Between Africa Energy and First Trust
Can any of the company-specific risk be diversified away by investing in both Africa Energy and First Trust 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 First Trust 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 First Trust Indxx, you can compare the effects of market volatilities on Africa Energy and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Energy and First Trust.
Diversification Opportunities for Africa Energy and First Trust
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Africa and First is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Africa Energy Corp and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Indxx has no effect on the direction of Africa Energy i.e., Africa Energy and First Trust go up and down completely randomly.
Pair Corralation between Africa Energy and First Trust
Assuming the 90 days horizon Africa Energy Corp is expected to under-perform the First Trust. In addition to that, Africa Energy is 27.16 times more volatile than First Trust Indxx. It trades about -0.02 of its total potential returns per unit of risk. First Trust Indxx is currently generating about 0.16 per unit of volatility. If you would invest 1,051 in First Trust Indxx on September 2, 2024 and sell it today you would earn a total of 102.00 from holding First Trust Indxx or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Africa Energy Corp vs. First Trust Indxx
Performance |
| Timeline |
| Africa Energy Corp |
| First Trust Indxx |
Africa Energy and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Energy and First Trust
The main advantage of trading using opposite Africa Energy and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Energy position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.The idea behind Africa Energy Corp and First Trust Indxx 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.| First Trust vs. iShares Canadian HYBrid | First Trust vs. Brompton European Dividend | First Trust vs. Solar Alliance Energy | First Trust vs. PHN Multi Style All Cap |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |