Correlation Between Africa Oil and Maha Energy
Can any of the company-specific risk be diversified away by investing in both Africa Oil and Maha 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 Oil and Maha Energy 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 Maha Energy AB, you can compare the effects of market volatilities on Africa Oil and Maha 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 Oil with a short position of Maha Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Maha Energy.
Diversification Opportunities for Africa Oil and Maha Energy
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Africa and Maha is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Maha Energy AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maha Energy AB 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 Maha Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maha Energy AB has no effect on the direction of Africa Oil i.e., Africa Oil and Maha Energy go up and down completely randomly.
Pair Corralation between Africa Oil and Maha Energy
Assuming the 90 days trading horizon Africa Oil Corp is expected to generate 1.03 times more return on investment than Maha Energy. However, Africa Oil is 1.03 times more volatile than Maha Energy AB. It trades about 0.18 of its potential returns per unit of risk. Maha Energy AB is currently generating about 0.09 per unit of risk. If you would invest 1,304 in Africa Oil Corp on August 30, 2024 and sell it today you would earn a total of 219.00 from holding Africa Oil Corp or generate 16.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Africa Oil Corp vs. Maha Energy AB
Performance |
| Timeline |
| Africa Oil Corp |
| Maha Energy AB |
Africa Oil and Maha Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Oil and Maha Energy
The main advantage of trading using opposite Africa Oil and Maha Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Oil position performs unexpectedly, Maha 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 Maha Energy will offset losses from the drop in Maha Energy'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 |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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