Correlation Between Africa Oil and Crew Energy

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

Diversification Opportunities for Africa Oil and Crew Energy

-0.13

Correlation Coefficient

Africa Oil  Crew Energy

Good diversification

The 3 months correlation between Africa and Crew is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Crew Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crew Energy 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 Crew Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crew Energy has no effect on the direction of Africa Oil i.e., Africa Oil and Crew Energy go up and down completely randomly.

Pair Corralation between Africa Oil and Crew Energy

Assuming the 90 days horizon Africa Oil is expected to generate 13.75 times less return on investment than Crew Energy. In addition to that, Africa Oil is 1.86 times more volatile than Crew Energy. It trades about 0.01 of its total potential returns per unit of risk. Crew Energy is currently generating about 0.32 per unit of volatility. If you would invest  496.00  in Crew Energy on August 31, 2024 and sell it today you would earn a total of  55.00  from holding Crew Energy or generate 11.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.5%
Values	Daily Returns

Africa Oil Corp  vs.  Crew Energy

Africa Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Africa Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Africa Oil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Crew Energy

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Crew Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile technical and fundamental indicators, Crew Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Africa Oil and Crew Energy

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

The idea behind Africa Oil Corp and Crew Energy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.