Correlation Between Africa Oil and Rubicon Organics

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

Diversification Opportunities for Africa Oil and Rubicon Organics

0.5

Correlation Coefficient

Africa Oil  Rubicon Organics

Very weak diversification

The 3 months correlation between Africa and Rubicon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Rubicon Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Organics 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 Rubicon Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Organics has no effect on the direction of Africa Oil i.e., Africa Oil and Rubicon Organics go up and down completely randomly.

Pair Corralation between Africa Oil and Rubicon Organics

Assuming the 90 days trading horizon Africa Oil Corp is expected to generate 0.59 times more return on investment than Rubicon Organics. However, Africa Oil Corp is 1.68 times less risky than Rubicon Organics. It trades about 0.13 of its potential returns per unit of risk. Rubicon Organics is currently generating about 0.05 per unit of risk. If you would invest  160.00  in Africa Oil Corp on December 30, 2024 and sell it today you would earn a total of  46.00  from holding Africa Oil Corp or generate 28.75% return on investment over 90 days.

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

Africa Oil Corp  vs.  Rubicon Organics

Africa Oil Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Oil Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Africa Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

Rubicon Organics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rubicon Organics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Rubicon Organics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Africa Oil and Rubicon Organics

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

The idea behind Africa Oil Corp and Rubicon Organics 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 CEOs Directory module to screen CEOs from public companies around the world.