Correlation Between Africa Oil and Cinis Fertilizer

Can any of the company-specific risk be diversified away by investing in both Africa Oil and Cinis Fertilizer 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 Oil and Cinis Fertilizer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Africa Oil Corp and Cinis Fertilizer AB, you can compare the effects of market volatilities on Africa Oil and Cinis Fertilizer 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 Oil with a short position of Cinis Fertilizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Cinis Fertilizer.

Diversification Opportunities for Africa Oil and Cinis Fertilizer

-0.64

Correlation Coefficient

Africa Oil  Cinis Fertilizer

Excellent diversification

The 3 months correlation between Africa and Cinis is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Cinis Fertilizer AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinis Fertilizer and Africa 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 Africa Oil Corp are associated (or correlated) with Cinis Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinis Fertilizer has no effect on the direction of Africa Oil i.e., Africa Oil and Cinis Fertilizer go up and down completely randomly.

Pair Corralation between Africa Oil and Cinis Fertilizer

Assuming the 90 days trading horizon Africa Oil Corp is expected to generate 0.4 times more return on investment than Cinis Fertilizer. However, Africa Oil Corp is 2.5 times less risky than Cinis Fertilizer. It trades about 0.04 of its potential returns per unit of risk. Cinis Fertilizer AB is currently generating about -0.11 per unit of risk. If you would invest  1,437  in Africa Oil Corp on September 4, 2024 and sell it today you would earn a total of  63.00  from holding Africa Oil Corp or generate 4.38% return on investment over 90 days.

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

Africa Oil Corp  vs.  Cinis Fertilizer AB

Africa Oil Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Oil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Africa Oil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cinis Fertilizer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cinis Fertilizer AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Africa Oil and Cinis Fertilizer

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

The idea behind Africa Oil Corp and Cinis Fertilizer AB 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.