Correlation Between Africa Oil and Storytel

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

Diversification Opportunities for Africa Oil and Storytel

-0.55

Correlation Coefficient

Africa Oil  Storytel

Excellent diversification

The 3 months correlation between Africa and Storytel is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Storytel AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storytel 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 Storytel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storytel AB has no effect on the direction of Africa Oil i.e., Africa Oil and Storytel go up and down completely randomly.

Pair Corralation between Africa Oil and Storytel

Assuming the 90 days trading horizon Africa Oil Corp is expected to under-perform the Storytel. But the stock apears to be less risky and, when comparing its historical volatility, Africa Oil Corp is 1.49 times less risky than Storytel. The stock trades about -0.03 of its potential returns per unit of risk. The Storytel AB is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  6,270  in Storytel AB on December 1, 2024 and sell it today you would earn a total of  3,060  from holding Storytel AB or generate 48.8% return on investment over 90 days.

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

Africa Oil Corp  vs.  Storytel 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.

Storytel AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Storytel AB are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Storytel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Africa Oil and Storytel

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

The idea behind Africa Oil Corp and Storytel 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.