Correlation Between Africa Oil and Gulfport Energy

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

Diversification Opportunities for Africa Oil and Gulfport Energy

0.47

Correlation Coefficient

Africa Oil  Gulfport Energy

Very weak diversification

The 3 months correlation between Africa and Gulfport is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Gulfport Energy Operating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulfport Energy Operating 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 Gulfport Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulfport Energy Operating has no effect on the direction of Africa Oil i.e., Africa Oil and Gulfport Energy go up and down completely randomly.

Pair Corralation between Africa Oil and Gulfport Energy

Assuming the 90 days horizon Africa Oil Corp is expected to under-perform the Gulfport Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Africa Oil Corp is 1.0 times less risky than Gulfport Energy. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Gulfport Energy Operating is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8,041  in Gulfport Energy Operating on October 4, 2024 and sell it today you would earn a total of  10,349  from holding Gulfport Energy Operating or generate 128.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Africa Oil Corp  vs.  Gulfport Energy Operating

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Gulfport Energy Operating

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulfport Energy Operating are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gulfport Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Africa Oil and Gulfport Energy

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

The idea behind Africa Oil Corp and Gulfport Energy Operating 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.