Correlation Between Africa Energy and Rubicon Organics
Can any of the company-specific risk be diversified away by investing in both Africa Energy and Rubicon Organics 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 Rubicon Organics 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 Rubicon Organics, you can compare the effects of market volatilities on Africa Energy and Rubicon Organics 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 Rubicon Organics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Energy and Rubicon Organics.
Diversification Opportunities for Africa Energy and Rubicon Organics
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Africa and Rubicon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Africa Energy Corp and Rubicon Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Organics 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 Rubicon Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Organics has no effect on the direction of Africa Energy i.e., Africa Energy and Rubicon Organics go up and down completely randomly.
Pair Corralation between Africa Energy and Rubicon Organics
Assuming the 90 days horizon Africa Energy Corp is expected to under-perform the Rubicon Organics. In addition to that, Africa Energy is 2.24 times more volatile than Rubicon Organics. It trades about -0.02 of its total potential returns per unit of risk. Rubicon Organics is currently generating about -0.02 per unit of volatility. If you would invest 45.00 in Rubicon Organics on September 2, 2024 and sell it today you would lose (12.00) from holding Rubicon Organics or give up 26.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Africa Energy Corp vs. Rubicon Organics
Performance |
| Timeline |
| Africa Energy Corp |
| Rubicon Organics |
Africa Energy and Rubicon Organics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Energy and Rubicon Organics
The main advantage of trading using opposite Africa Energy and Rubicon Organics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Energy position performs unexpectedly, Rubicon Organics 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 Rubicon Organics will offset losses from the drop in Rubicon Organics' long position.The idea behind Africa Energy Corp and Rubicon Organics 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.| Rubicon Organics vs. iShares Canadian HYBrid | Rubicon Organics vs. Altagas Cum Red | Rubicon Organics vs. European Residential Real | Rubicon Organics vs. iShares Fundamental Hedged |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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