Correlation Between Gear Energy and Africa Oil
Can any of the company-specific risk be diversified away by investing in both Gear Energy and Africa Oil 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 Gear Energy and Africa Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gear Energy and Africa Oil Corp, you can compare the effects of market volatilities on Gear Energy and Africa Oil 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 Gear Energy with a short position of Africa Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear Energy and Africa Oil.
Diversification Opportunities for Gear Energy and Africa Oil
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Gear and Africa is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy and Africa Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Oil Corp and Gear 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 Gear Energy are associated (or correlated) with Africa Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Oil Corp has no effect on the direction of Gear Energy i.e., Gear Energy and Africa Oil go up and down completely randomly.
Pair Corralation between Gear Energy and Africa Oil
Assuming the 90 days trading horizon Gear Energy is expected to under-perform the Africa Oil. In addition to that, Gear Energy is 1.06 times more volatile than Africa Oil Corp. It trades about -0.06 of its total potential returns per unit of risk. Africa Oil Corp is currently generating about 0.15 per unit of volatility. If you would invest 178.00 in Africa Oil Corp on August 26, 2024 and sell it today you would earn a total of 29.00 from holding Africa Oil Corp or generate 16.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gear Energy vs. Africa Oil Corp
Performance |
| Timeline |
| Gear Energy |
| Africa Oil Corp |
Gear Energy and Africa Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gear Energy and Africa Oil
The main advantage of trading using opposite Gear Energy and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear Energy position performs unexpectedly, Africa Oil 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 Oil will offset losses from the drop in Africa Oil's long position.| Gear Energy vs. Cardinal Energy | Gear Energy vs. Tamarack Valley Energy | Gear Energy vs. Athabasca Oil Corp | Gear Energy vs. Headwater Exploration |
| Africa Oil vs. Gear Energy | Africa Oil vs. Journey Energy | Africa Oil vs. Headwater Exploration | Africa Oil vs. Frontera Energy Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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