Correlation Between Africa Oil and Lundin Mining
Can any of the company-specific risk be diversified away by investing in both Africa Oil and Lundin Mining 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 Oil and Lundin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Africa Oil Corp and Lundin Mining, you can compare the effects of market volatilities on Africa Oil and Lundin Mining 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 Oil with a short position of Lundin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Lundin Mining.
Diversification Opportunities for Africa Oil and Lundin Mining
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Africa and Lundin is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Lundin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining and Africa Oil 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 Oil Corp are associated (or correlated) with Lundin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Mining has no effect on the direction of Africa Oil i.e., Africa Oil and Lundin Mining go up and down completely randomly.
Pair Corralation between Africa Oil and Lundin Mining
Assuming the 90 days trading horizon Africa Oil Corp is expected to generate 1.09 times more return on investment than Lundin Mining. However, Africa Oil is 1.09 times more volatile than Lundin Mining. It trades about 0.1 of its potential returns per unit of risk. Lundin Mining is currently generating about -0.08 per unit of risk. If you would invest 1,462 in Africa Oil Corp on October 26, 2024 and sell it today you would earn a total of 53.00 from holding Africa Oil Corp or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Africa Oil Corp vs. Lundin Mining
Performance |
| Timeline |
| Africa Oil Corp |
| Lundin Mining |
Africa Oil and Lundin Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Oil and Lundin Mining
The main advantage of trading using opposite Africa Oil and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Oil position performs unexpectedly, Lundin Mining 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 Lundin Mining will offset losses from the drop in Lundin Mining's long position.| Africa Oil vs. International Petroleum | Africa Oil vs. Africa Energy Corp | Africa Oil vs. Africa Oil Corp | Africa Oil vs. Lundin Mining |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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