Correlation Between Africa Oil and Spartan Delta

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

Diversification Opportunities for Africa Oil and Spartan Delta

0.61

Correlation Coefficient

Africa Oil  Spartan Delta

Poor diversification

The 3 months correlation between Africa and Spartan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Spartan Delta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spartan Delta Corp 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 Spartan Delta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spartan Delta Corp has no effect on the direction of Africa Oil i.e., Africa Oil and Spartan Delta go up and down completely randomly.

Pair Corralation between Africa Oil and Spartan Delta

Assuming the 90 days trading horizon Africa Oil Corp is expected to generate 0.93 times more return on investment than Spartan Delta. However, Africa Oil Corp is 1.08 times less risky than Spartan Delta. It trades about 0.02 of its potential returns per unit of risk. Spartan Delta Corp is currently generating about -0.03 per unit of risk. If you would invest  190.00  in Africa Oil Corp on December 1, 2024 and sell it today you would earn a total of  2.00  from holding Africa Oil Corp or generate 1.05% return on investment over 90 days.

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

Africa Oil Corp  vs.  Spartan Delta Corp

Africa Oil Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Oil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Africa Oil is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Spartan Delta Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spartan Delta Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Spartan Delta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Africa Oil and Spartan Delta

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

The idea behind Africa Oil Corp and Spartan Delta Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.