Correlation Between Africa Oil and PetroTal Corp

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

Diversification Opportunities for Africa Oil and PetroTal Corp

0.2

Correlation Coefficient

Africa Oil  PetroTal Corp

Modest diversification

The 3 months correlation between Africa and PetroTal is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and PetroTal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroTal 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 PetroTal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroTal Corp has no effect on the direction of Africa Oil i.e., Africa Oil and PetroTal Corp go up and down completely randomly.

Pair Corralation between Africa Oil and PetroTal Corp

Assuming the 90 days horizon Africa Oil Corp is expected to generate 0.95 times more return on investment than PetroTal Corp. However, Africa Oil Corp is 1.06 times less risky than PetroTal Corp. It trades about 0.21 of its potential returns per unit of risk. PetroTal Corp is currently generating about 0.01 per unit of risk. If you would invest  129.00  in Africa Oil Corp on December 30, 2024 and sell it today you would earn a total of  14.00  from holding Africa Oil Corp or generate 10.85% return on investment over 90 days.

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

Africa Oil Corp  vs.  PetroTal Corp

Africa Oil Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Oil Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Africa Oil may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PetroTal Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PetroTal Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, PetroTal Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Africa Oil and PetroTal Corp

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

The idea behind Africa Oil Corp and PetroTal 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.