Correlation Between Africa Oil and Carnarvon Petroleum
Can any of the company-specific risk be diversified away by investing in both Africa Oil and Carnarvon Petroleum 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 Carnarvon Petroleum 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 Carnarvon Petroleum Limited, you can compare the effects of market volatilities on Africa Oil and Carnarvon Petroleum 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 Carnarvon Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Carnarvon Petroleum.
Diversification Opportunities for Africa Oil and Carnarvon Petroleum
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Africa and Carnarvon is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Carnarvon Petroleum Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnarvon Petroleum 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 Carnarvon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnarvon Petroleum has no effect on the direction of Africa Oil i.e., Africa Oil and Carnarvon Petroleum go up and down completely randomly.
Pair Corralation between Africa Oil and Carnarvon Petroleum
Assuming the 90 days horizon Africa Oil Corp is expected to under-perform the Carnarvon Petroleum. But the pink sheet apears to be less risky and, when comparing its historical volatility, Africa Oil Corp is 1.84 times less risky than Carnarvon Petroleum. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Carnarvon Petroleum Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 14.00 in Carnarvon Petroleum Limited on August 30, 2024 and sell it today you would lose (4.00) from holding Carnarvon Petroleum Limited or give up 28.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Africa Oil Corp vs. Carnarvon Petroleum Limited
Performance |
| Timeline |
| Africa Oil Corp |
| Carnarvon Petroleum |
Africa Oil and Carnarvon Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Oil and Carnarvon Petroleum
The main advantage of trading using opposite Africa Oil and Carnarvon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Oil position performs unexpectedly, Carnarvon Petroleum 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 Carnarvon Petroleum will offset losses from the drop in Carnarvon Petroleum's long position.| Africa Oil vs. Gear Energy | Africa Oil vs. Tamarack Valley Energy | Africa Oil vs. MEG Energy Corp | Africa Oil vs. Cardinal Energy |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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