Correlation Between Tullow Oil and Africa Energy
Can any of the company-specific risk be diversified away by investing in both Tullow Oil 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 Tullow Oil and Africa Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tullow Oil PLC and Africa Energy Corp, you can compare the effects of market volatilities on Tullow Oil 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 Tullow Oil with a short position of Africa Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tullow Oil and Africa Energy.
Diversification Opportunities for Tullow Oil and Africa Energy
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tullow and Africa is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Tullow Oil PLC 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 Tullow Oil 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 Tullow Oil PLC 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 Tullow Oil i.e., Tullow Oil and Africa Energy go up and down completely randomly.
Pair Corralation between Tullow Oil and Africa Energy
Assuming the 90 days horizon Tullow Oil PLC is expected to under-perform the Africa Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Tullow Oil PLC is 1.17 times less risky than Africa Energy. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Africa Energy Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1.50 in Africa Energy Corp on September 1, 2024 and sell it today you would earn a total of 0.20 from holding Africa Energy Corp or generate 13.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tullow Oil PLC vs. Africa Energy Corp
Performance |
| Timeline |
| Tullow Oil PLC |
| Africa Energy Corp |
Tullow Oil and Africa Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tullow Oil and Africa Energy
The main advantage of trading using opposite Tullow Oil and Africa Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tullow Oil 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.| Tullow Oil vs. Permian Resources | Tullow Oil vs. Devon Energy | Tullow Oil vs. EOG Resources | Tullow Oil vs. Coterra Energy |
| 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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