Correlation Between Africa Oil and Divio Technologies

Can any of the company-specific risk be diversified away by investing in both Africa Oil and Divio Technologies 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 Divio Technologies 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 Divio Technologies AB, you can compare the effects of market volatilities on Africa Oil and Divio Technologies 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 Divio Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Divio Technologies.

Diversification Opportunities for Africa Oil and Divio Technologies

-0.59

Correlation Coefficient

Africa Oil  Divio Technologies

Excellent diversification

The 3 months correlation between Africa and Divio is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Divio Technologies AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Divio Technologies 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 Divio Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Divio Technologies has no effect on the direction of Africa Oil i.e., Africa Oil and Divio Technologies go up and down completely randomly.

Pair Corralation between Africa Oil and Divio Technologies

Assuming the 90 days trading horizon Africa Oil Corp is expected to under-perform the Divio Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Africa Oil Corp is 3.62 times less risky than Divio Technologies. The stock trades about -0.28 of its potential returns per unit of risk. The Divio Technologies AB is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Divio Technologies AB on September 25, 2024 and sell it today you would lose (1.00) from holding Divio Technologies AB or give up 6.67% of portfolio value over 90 days.

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

Africa Oil Corp  vs.  Divio Technologies 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.

Divio Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Divio Technologies AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Africa Oil and Divio Technologies

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

The idea behind Africa Oil Corp and Divio Technologies 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.