Correlation Between Africa Energy and Forum Energy
Can any of the company-specific risk be diversified away by investing in both Africa Energy and Forum Energy 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 Forum Energy 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 Forum Energy Metals, you can compare the effects of market volatilities on Africa Energy and Forum Energy 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 Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Energy and Forum Energy.
Diversification Opportunities for Africa Energy and Forum Energy
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Africa and Forum is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Africa Energy Corp and Forum Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Metals 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 Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Metals has no effect on the direction of Africa Energy i.e., Africa Energy and Forum Energy go up and down completely randomly.
Pair Corralation between Africa Energy and Forum Energy
Assuming the 90 days horizon Africa Energy Corp is expected to generate 2.2 times more return on investment than Forum Energy. However, Africa Energy is 2.2 times more volatile than Forum Energy Metals. It trades about -0.02 of its potential returns per unit of risk. Forum Energy Metals is currently generating about -0.06 per unit of risk. If you would invest 9.00 in Africa Energy Corp on September 2, 2024 and sell it today you would lose (6.50) from holding Africa Energy Corp or give up 72.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Africa Energy Corp vs. Forum Energy Metals
Performance |
| Timeline |
| Africa Energy Corp |
| Forum Energy Metals |
Africa Energy and Forum Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Energy and Forum Energy
The main advantage of trading using opposite Africa Energy and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Energy position performs unexpectedly, Forum Energy 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 Forum Energy will offset losses from the drop in Forum Energy's long position.The idea behind Africa Energy Corp and Forum Energy Metals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |