Correlation Between Frontera Energy and Africa Energy
Can any of the company-specific risk be diversified away by investing in both Frontera Energy and Africa 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 Frontera Energy and Africa Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontera Energy Corp and Africa Energy Corp, you can compare the effects of market volatilities on Frontera Energy and Africa 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 Frontera Energy with a short position of Africa Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontera Energy and Africa Energy.
Diversification Opportunities for Frontera Energy and Africa Energy
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Frontera and Africa is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Frontera Energy Corp and Africa Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Energy Corp and Frontera Energy 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 Frontera Energy Corp are associated (or correlated) with Africa Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Energy Corp has no effect on the direction of Frontera Energy i.e., Frontera Energy and Africa Energy go up and down completely randomly.
Pair Corralation between Frontera Energy and Africa Energy
Assuming the 90 days horizon Frontera Energy Corp is expected to generate 0.21 times more return on investment than Africa Energy. However, Frontera Energy Corp is 4.87 times less risky than Africa Energy. It trades about -0.02 of its potential returns per unit of risk. Africa Energy Corp is currently generating about -0.06 per unit of risk. If you would invest 631.00 in Frontera Energy Corp on September 1, 2024 and sell it today you would lose (54.00) from holding Frontera Energy Corp or give up 8.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontera Energy Corp vs. Africa Energy Corp
Performance |
| Timeline |
| Frontera Energy Corp |
| Africa Energy Corp |
Frontera Energy and Africa Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontera Energy and Africa Energy
The main advantage of trading using opposite Frontera Energy and Africa Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontera Energy position performs unexpectedly, Africa 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 Africa Energy will offset losses from the drop in Africa Energy's long position.| Frontera Energy vs. Petroleo Brasileiro Petrobras | Frontera Energy vs. Equinor ASA ADR | Frontera Energy vs. Eni SpA ADR | Frontera Energy vs. YPF Sociedad Anonima |
| Africa Energy vs. PetroShale | Africa Energy vs. Horizon Oil Limited | Africa Energy vs. Saturn Oil Gas | Africa Energy vs. San Leon Energy |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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