Correlation Between Africa Oil and Journey Energy
Can any of the company-specific risk be diversified away by investing in both Africa Oil and Journey 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 Journey 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 Journey Energy, you can compare the effects of market volatilities on Africa Oil and Journey 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 Journey Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Journey Energy.
Diversification Opportunities for Africa Oil and Journey Energy
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Africa and Journey is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Journey Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Journey Energy 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 Journey Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Journey Energy has no effect on the direction of Africa Oil i.e., Africa Oil and Journey Energy go up and down completely randomly.
Pair Corralation between Africa Oil and Journey Energy
Assuming the 90 days horizon Africa Oil Corp is expected to generate 1.08 times more return on investment than Journey Energy. However, Africa Oil is 1.08 times more volatile than Journey Energy. It trades about 0.17 of its potential returns per unit of risk. Journey Energy is currently generating about -0.02 per unit of risk. If you would invest 127.00 in Africa Oil Corp on August 28, 2024 and sell it today you would earn a total of 14.00 from holding Africa Oil Corp or generate 11.02% 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. Journey Energy
Performance |
| Timeline |
| Africa Oil Corp |
| Journey Energy |
Africa Oil and Journey Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Oil and Journey Energy
The main advantage of trading using opposite Africa Oil and Journey Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Oil position performs unexpectedly, Journey 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 Journey Energy will offset losses from the drop in Journey Energy'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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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