Correlation Between International Petroleum and Africa Oil
Can any of the company-specific risk be diversified away by investing in both International Petroleum 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 International Petroleum and Africa Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Petroleum and Africa Oil Corp, you can compare the effects of market volatilities on International Petroleum 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 International Petroleum with a short position of Africa Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Petroleum and Africa Oil.
Diversification Opportunities for International Petroleum and Africa Oil
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between International and Africa is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding International Petroleum 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 International Petroleum 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 International Petroleum 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 International Petroleum i.e., International Petroleum and Africa Oil go up and down completely randomly.
Pair Corralation between International Petroleum and Africa Oil
Assuming the 90 days trading horizon International Petroleum is expected to generate 0.97 times more return on investment than Africa Oil. However, International Petroleum is 1.03 times less risky than Africa Oil. It trades about 0.04 of its potential returns per unit of risk. Africa Oil Corp is currently generating about -0.02 per unit of risk. If you would invest 9,480 in International Petroleum on August 30, 2024 and sell it today you would earn a total of 2,820 from holding International Petroleum or generate 29.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Petroleum vs. Africa Oil Corp
Performance |
| Timeline |
| International Petroleum |
| Africa Oil Corp |
International Petroleum and Africa Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Petroleum and Africa Oil
The main advantage of trading using opposite International Petroleum and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Petroleum 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.| International Petroleum vs. Africa Oil Corp | International Petroleum vs. Tethys Oil AB | International Petroleum vs. Maha Energy AB | International Petroleum vs. Cortus Energy AB |
| Africa Oil vs. International Petroleum | Africa Oil vs. Africa Energy Corp | Africa Oil vs. Africa Oil Corp | Africa Oil vs. Lundin Mining |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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