Correlation Between Valeura Energy and Africa Oil
Can any of the company-specific risk be diversified away by investing in both Valeura 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 Valeura 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 Valeura Energy and Africa Oil Corp, you can compare the effects of market volatilities on Valeura 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 Valeura Energy with a short position of Africa Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valeura Energy and Africa Oil.
Diversification Opportunities for Valeura Energy and Africa Oil
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Valeura and Africa is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Valeura 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 Valeura 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 Valeura 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 Valeura Energy i.e., Valeura Energy and Africa Oil go up and down completely randomly.
Pair Corralation between Valeura Energy and Africa Oil
Assuming the 90 days trading horizon Valeura Energy is expected to generate 1.66 times more return on investment than Africa Oil. However, Valeura Energy is 1.66 times more volatile than Africa Oil Corp. It trades about 0.33 of its potential returns per unit of risk. Africa Oil Corp is currently generating about 0.17 per unit of risk. If you would invest 452.00 in Valeura Energy on September 1, 2024 and sell it today you would earn a total of 170.00 from holding Valeura Energy or generate 37.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Valeura Energy vs. Africa Oil Corp
Performance |
| Timeline |
| Valeura Energy |
| Africa Oil Corp |
Valeura Energy and Africa Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valeura Energy and Africa Oil
The main advantage of trading using opposite Valeura Energy and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valeura 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.| Valeura Energy vs. Journey Energy | Valeura Energy vs. Yangarra Resources | Valeura Energy vs. Obsidian Energy | Valeura Energy vs. Pine Cliff Energy |
| Africa Oil vs. Journey Energy | Africa Oil vs. Yangarra Resources | Africa Oil vs. Obsidian Energy | Africa Oil vs. Pine Cliff 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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