Correlation Between Africa Energy and Pine Cliff
Can any of the company-specific risk be diversified away by investing in both Africa Energy and Pine Cliff 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 Pine Cliff 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 Pine Cliff Energy, you can compare the effects of market volatilities on Africa Energy and Pine Cliff 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 Pine Cliff. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Energy and Pine Cliff.
Diversification Opportunities for Africa Energy and Pine Cliff
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Africa and Pine is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Africa Energy Corp and Pine Cliff Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pine Cliff Energy 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 Pine Cliff. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pine Cliff Energy has no effect on the direction of Africa Energy i.e., Africa Energy and Pine Cliff go up and down completely randomly.
Pair Corralation between Africa Energy and Pine Cliff
Assuming the 90 days horizon Africa Energy Corp is expected to generate 3.83 times more return on investment than Pine Cliff. However, Africa Energy is 3.83 times more volatile than Pine Cliff Energy. It trades about 0.05 of its potential returns per unit of risk. Pine Cliff Energy is currently generating about 0.07 per unit of risk. If you would invest 2.50 in Africa Energy Corp on September 2, 2024 and sell it today you would earn a total of 0.00 from holding Africa Energy Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Africa Energy Corp vs. Pine Cliff Energy
Performance |
| Timeline |
| Africa Energy Corp |
| Pine Cliff Energy |
Africa Energy and Pine Cliff Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Energy and Pine Cliff
The main advantage of trading using opposite Africa Energy and Pine Cliff positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Energy position performs unexpectedly, Pine Cliff 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 Pine Cliff will offset losses from the drop in Pine Cliff's long position.The idea behind Africa Energy Corp and Pine Cliff Energy 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.| Pine Cliff vs. Gear Energy | Pine Cliff vs. Headwater Exploration | Pine Cliff vs. Cardinal Energy | Pine Cliff vs. Journey Energy |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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