Correlation Between Africa Energy and Prairie Provident
Can any of the company-specific risk be diversified away by investing in both Africa Energy and Prairie Provident 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 Energy and Prairie Provident into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Africa Energy Corp and Prairie Provident Resources, you can compare the effects of market volatilities on Africa Energy and Prairie Provident 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 Energy with a short position of Prairie Provident. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Energy and Prairie Provident.
Diversification Opportunities for Africa Energy and Prairie Provident
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Africa and Prairie is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Africa Energy Corp and Prairie Provident Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prairie Provident and Africa 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 Africa Energy Corp are associated (or correlated) with Prairie Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prairie Provident has no effect on the direction of Africa Energy i.e., Africa Energy and Prairie Provident go up and down completely randomly.
Pair Corralation between Africa Energy and Prairie Provident
Assuming the 90 days horizon Africa Energy Corp is expected to under-perform the Prairie Provident. But the pink sheet apears to be less risky and, when comparing its historical volatility, Africa Energy Corp is 1.29 times less risky than Prairie Provident. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Prairie Provident Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4.52 in Prairie Provident Resources on September 3, 2024 and sell it today you would lose (2.32) from holding Prairie Provident Resources or give up 51.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Africa Energy Corp vs. Prairie Provident Resources
Performance |
| Timeline |
| Africa Energy Corp |
| Prairie Provident |
Africa Energy and Prairie Provident Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Energy and Prairie Provident
The main advantage of trading using opposite Africa Energy and Prairie Provident positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Energy position performs unexpectedly, Prairie Provident 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 Prairie Provident will offset losses from the drop in Prairie Provident's long position.| Africa Energy vs. PetroShale | Africa Energy vs. Horizon Oil Limited | Africa Energy vs. Saturn Oil Gas | Africa Energy vs. San Leon 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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