Correlation Between Africa Oil and AirIQ
Can any of the company-specific risk be diversified away by investing in both Africa Oil and AirIQ 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 AirIQ 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 AirIQ Inc, you can compare the effects of market volatilities on Africa Oil and AirIQ 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 AirIQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and AirIQ.
Diversification Opportunities for Africa Oil and AirIQ
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Africa and AirIQ is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and AirIQ Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AirIQ Inc 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 AirIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AirIQ Inc has no effect on the direction of Africa Oil i.e., Africa Oil and AirIQ go up and down completely randomly.
Pair Corralation between Africa Oil and AirIQ
Assuming the 90 days trading horizon Africa Oil Corp is expected to under-perform the AirIQ. But the stock apears to be less risky and, when comparing its historical volatility, Africa Oil Corp is 2.04 times less risky than AirIQ. The stock trades about -0.01 of its potential returns per unit of risk. The AirIQ Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 27.00 in AirIQ Inc on September 2, 2024 and sell it today you would earn a total of 13.00 from holding AirIQ Inc or generate 48.15% 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. AirIQ Inc
Performance |
| Timeline |
| Africa Oil Corp |
| AirIQ Inc |
Africa Oil and AirIQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Oil and AirIQ
The main advantage of trading using opposite Africa Oil and AirIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Oil position performs unexpectedly, AirIQ 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 AirIQ will offset losses from the drop in AirIQ's long position.The idea behind Africa Oil Corp and AirIQ Inc 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.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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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