Correlation Between Africa Oil and Rocky Mountain
Can any of the company-specific risk be diversified away by investing in both Africa Oil and Rocky Mountain 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 Rocky Mountain 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 Rocky Mountain Liquor, you can compare the effects of market volatilities on Africa Oil and Rocky Mountain 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 Rocky Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Rocky Mountain.
Diversification Opportunities for Africa Oil and Rocky Mountain
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Africa and Rocky is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Rocky Mountain Liquor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Liquor 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 Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Liquor has no effect on the direction of Africa Oil i.e., Africa Oil and Rocky Mountain go up and down completely randomly.
Pair Corralation between Africa Oil and Rocky Mountain
Assuming the 90 days trading horizon Africa Oil Corp is expected to under-perform the Rocky Mountain. But the stock apears to be less risky and, when comparing its historical volatility, Africa Oil Corp is 2.04 times less risky than Rocky Mountain. The stock trades about -0.06 of its potential returns per unit of risk. The Rocky Mountain Liquor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 12.00 in Rocky Mountain Liquor on September 2, 2024 and sell it today you would earn a total of 1.00 from holding Rocky Mountain Liquor or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Africa Oil Corp vs. Rocky Mountain Liquor
Performance |
| Timeline |
| Africa Oil Corp |
| Rocky Mountain Liquor |
Africa Oil and Rocky Mountain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Oil and Rocky Mountain
The main advantage of trading using opposite Africa Oil and Rocky Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Oil position performs unexpectedly, Rocky Mountain 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 Rocky Mountain will offset losses from the drop in Rocky Mountain's long position.The idea behind Africa Oil Corp and Rocky Mountain Liquor 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.| Rocky Mountain vs. DelphX Capital Markets | Rocky Mountain vs. Citadel Income | Rocky Mountain vs. iShares Canadian HYBrid | Rocky Mountain vs. Altagas Cum Red |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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