Correlation Between Africa Oil and Wishpond Technologies

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

Diversification Opportunities for Africa Oil and Wishpond Technologies

-0.27

Correlation Coefficient

Africa Oil  Wishpond Technologies

Very good diversification

The 3 months correlation between Africa and Wishpond is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Wishpond Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wishpond Technologies 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 Wishpond Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wishpond Technologies has no effect on the direction of Africa Oil i.e., Africa Oil and Wishpond Technologies go up and down completely randomly.

Pair Corralation between Africa Oil and Wishpond Technologies

Assuming the 90 days trading horizon Africa Oil Corp is expected to generate 0.52 times more return on investment than Wishpond Technologies. However, Africa Oil Corp is 1.94 times less risky than Wishpond Technologies. It trades about -0.04 of its potential returns per unit of risk. Wishpond Technologies is currently generating about -0.04 per unit of risk. If you would invest  288.00  in Africa Oil Corp on August 31, 2024 and sell it today you would lose (91.00) from holding Africa Oil Corp or give up 31.6% 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.  Wishpond Technologies

Africa Oil Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Oil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, Africa Oil may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Wishpond Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wishpond Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Africa Oil and Wishpond Technologies

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

The idea behind Africa Oil Corp and Wishpond Technologies 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.