Correlation Between Africa Oil and Enad Global

Can any of the company-specific risk be diversified away by investing in both Africa Oil and Enad Global 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 Enad Global 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 Enad Global 7, you can compare the effects of market volatilities on Africa Oil and Enad Global 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 Enad Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Enad Global.

Diversification Opportunities for Africa Oil and Enad Global

-0.01

Correlation Coefficient

Africa Oil  Enad Global

Good diversification

The 3 months correlation between Africa and Enad is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Enad Global 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enad Global 7 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 Enad Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enad Global 7 has no effect on the direction of Africa Oil i.e., Africa Oil and Enad Global go up and down completely randomly.

Pair Corralation between Africa Oil and Enad Global

Assuming the 90 days trading horizon Africa Oil Corp is expected to under-perform the Enad Global. But the stock apears to be less risky and, when comparing its historical volatility, Africa Oil Corp is 1.5 times less risky than Enad Global. The stock trades about -0.1 of its potential returns per unit of risk. The Enad Global 7 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,411  in Enad Global 7 on September 22, 2024 and sell it today you would earn a total of  211.00  from holding Enad Global 7 or generate 14.95% return on investment over 90 days.

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

Africa Oil Corp  vs.  Enad Global 7

Africa Oil Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Oil Corp are ranked lower than 2 (%) 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.

Enad Global 7

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enad Global 7 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enad Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Africa Oil and Enad Global

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

The idea behind Africa Oil Corp and Enad Global 7 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.