Correlation Between Africa Energy and Tullow Oil
Can any of the company-specific risk be diversified away by investing in both Africa Energy and Tullow 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 Africa Energy and Tullow Oil 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 Tullow Oil PLC, you can compare the effects of market volatilities on Africa Energy and Tullow 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 Africa Energy with a short position of Tullow Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Energy and Tullow Oil.
Diversification Opportunities for Africa Energy and Tullow Oil
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Africa and Tullow is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Africa Energy Corp and Tullow Oil PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tullow Oil PLC 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 Tullow Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tullow Oil PLC has no effect on the direction of Africa Energy i.e., Africa Energy and Tullow Oil go up and down completely randomly.
Pair Corralation between Africa Energy and Tullow Oil
Assuming the 90 days horizon Africa Energy Corp is expected to under-perform the Tullow Oil. In addition to that, Africa Energy is 1.33 times more volatile than Tullow Oil PLC. It trades about -0.02 of its total potential returns per unit of risk. Tullow Oil PLC is currently generating about 0.01 per unit of volatility. If you would invest 22.00 in Tullow Oil PLC on September 3, 2024 and sell it today you would lose (9.00) from holding Tullow Oil PLC or give up 40.91% 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. Tullow Oil PLC
Performance |
| Timeline |
| Africa Energy Corp |
| Tullow Oil PLC |
Africa Energy and Tullow Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Energy and Tullow Oil
The main advantage of trading using opposite Africa Energy and Tullow Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Energy position performs unexpectedly, Tullow 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 Tullow Oil will offset losses from the drop in Tullow Oil'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 |
| Tullow Oil vs. San Leon Energy | Tullow Oil vs. Dno ASA | Tullow Oil vs. PetroShale | Tullow Oil vs. Horizon Oil Limited |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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