Correlation Between Amazon CDR and Africa Energy
Can any of the company-specific risk be diversified away by investing in both Amazon CDR and Africa 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 Amazon CDR and Africa Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon CDR and Africa Energy Corp, you can compare the effects of market volatilities on Amazon CDR and Africa 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 Amazon CDR with a short position of Africa Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon CDR and Africa Energy.
Diversification Opportunities for Amazon CDR and Africa Energy
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Amazon and Africa is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Amazon CDR and Africa Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Energy Corp and Amazon CDR 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 Amazon CDR are associated (or correlated) with Africa Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Energy Corp has no effect on the direction of Amazon CDR i.e., Amazon CDR and Africa Energy go up and down completely randomly.
Pair Corralation between Amazon CDR and Africa Energy
Assuming the 90 days trading horizon Amazon CDR is expected to under-perform the Africa Energy. But the stock apears to be less risky and, when comparing its historical volatility, Amazon CDR is 4.15 times less risky than Africa Energy. The stock trades about -0.32 of its potential returns per unit of risk. The Africa Energy Corp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Africa Energy Corp on November 29, 2024 and sell it today you would lose (0.50) from holding Africa Energy Corp or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon CDR vs. Africa Energy Corp
Performance |
| Timeline |
| Amazon CDR |
| Africa Energy Corp |
Amazon CDR and Africa Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon CDR and Africa Energy
The main advantage of trading using opposite Amazon CDR and Africa Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon CDR position performs unexpectedly, Africa 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 Africa Energy will offset losses from the drop in Africa Energy's long position.| Amazon CDR vs. Homerun Resources | Amazon CDR vs. Western Investment | Amazon CDR vs. Brookfield Office Properties | Amazon CDR vs. Canadian General Investments |
| Africa Energy vs. Africa Oil Corp | Africa Energy vs. Eco Atlantic Oil | Africa Energy vs. Alvopetro Energy | Africa Energy vs. ShaMaran Petroleum Corp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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