Correlation Between Africa Oil and NP3 Fastigheter

Can any of the company-specific risk be diversified away by investing in both Africa Oil and NP3 Fastigheter 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 NP3 Fastigheter 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 NP3 Fastigheter AB, you can compare the effects of market volatilities on Africa Oil and NP3 Fastigheter 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 NP3 Fastigheter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and NP3 Fastigheter.

Diversification Opportunities for Africa Oil and NP3 Fastigheter

-0.26

Correlation Coefficient

Africa Oil  NP3 Fastigheter

Very good diversification

The 3 months correlation between Africa and NP3 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and NP3 Fastigheter AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NP3 Fastigheter AB 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 NP3 Fastigheter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NP3 Fastigheter AB has no effect on the direction of Africa Oil i.e., Africa Oil and NP3 Fastigheter go up and down completely randomly.

Pair Corralation between Africa Oil and NP3 Fastigheter

Assuming the 90 days trading horizon Africa Oil Corp is expected to generate 1.15 times more return on investment than NP3 Fastigheter. However, Africa Oil is 1.15 times more volatile than NP3 Fastigheter AB. It trades about 0.01 of its potential returns per unit of risk. NP3 Fastigheter AB is currently generating about -0.04 per unit of risk. If you would invest  1,441  in Africa Oil Corp on December 29, 2024 and sell it today you would lose (1.00) from holding Africa Oil Corp or give up 0.07% of portfolio value over 90 days.

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

Africa Oil Corp  vs.  NP3 Fastigheter AB

Africa Oil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Africa Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

NP3 Fastigheter AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days NP3 Fastigheter AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NP3 Fastigheter is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Africa Oil and NP3 Fastigheter

The main advantage of trading using opposite Africa Oil and NP3 Fastigheter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Oil position performs unexpectedly, NP3 Fastigheter 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 NP3 Fastigheter will offset losses from the drop in NP3 Fastigheter's long position.

The idea behind Africa Oil Corp and NP3 Fastigheter 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.