Correlation Between Africa Energy and Orca Energy

Can any of the company-specific risk be diversified away by investing in both Africa Energy and Orca 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 Africa Energy and Orca Energy 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 Orca Energy Group, you can compare the effects of market volatilities on Africa Energy and Orca 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 Africa Energy with a short position of Orca Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Energy and Orca Energy.

Diversification Opportunities for Africa Energy and Orca Energy

0.76

Correlation Coefficient

Africa Energy  Orca Energy

Poor diversification

The 3 months correlation between Africa and Orca is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Africa Energy Corp and Orca Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orca Energy Group 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 Orca Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orca Energy Group has no effect on the direction of Africa Energy i.e., Africa Energy and Orca Energy go up and down completely randomly.

Pair Corralation between Africa Energy and Orca Energy

Assuming the 90 days horizon Africa Energy Corp is expected to generate 3.08 times more return on investment than Orca Energy. However, Africa Energy is 3.08 times more volatile than Orca Energy Group. It trades about 0.01 of its potential returns per unit of risk. Orca Energy Group is currently generating about -0.05 per unit of risk. If you would invest  3.00  in Africa Energy Corp on September 14, 2024 and sell it today you would lose (0.50) from holding Africa Energy Corp or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Africa Energy Corp  vs.  Orca Energy Group

Africa Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Africa Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unfluctuating basic indicators, Africa Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Orca Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orca Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Africa Energy and Orca Energy

The main advantage of trading using opposite Africa Energy and Orca Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Energy position performs unexpectedly, Orca 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 Orca Energy will offset losses from the drop in Orca Energy's long position.

The idea behind Africa Energy Corp and Orca Energy Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.