Correlation Between BlackRock and Africa Oil

Can any of the company-specific risk be diversified away by investing in both BlackRock and Africa Oil 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 BlackRock and Africa Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BlackRock and Africa Oil Corp, you can compare the effects of market volatilities on BlackRock and Africa Oil 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 BlackRock with a short position of Africa Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock and Africa Oil.

Diversification Opportunities for BlackRock and Africa Oil

0.24

Correlation Coefficient

BlackRock  Africa Oil

Modest diversification

The 3 months correlation between BlackRock and Africa is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Africa Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Oil Corp and BlackRock 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 BlackRock are associated (or correlated) with Africa Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Oil Corp has no effect on the direction of BlackRock i.e., BlackRock and Africa Oil go up and down completely randomly.

Pair Corralation between BlackRock and Africa Oil

Considering the 90-day investment horizon BlackRock is expected to generate 0.57 times more return on investment than Africa Oil. However, BlackRock is 1.75 times less risky than Africa Oil. It trades about 0.13 of its potential returns per unit of risk. Africa Oil Corp is currently generating about -0.07 per unit of risk. If you would invest  101,508  in BlackRock on October 1, 2024 and sell it today you would earn a total of  2,910  from holding BlackRock or generate 2.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

BlackRock  vs.  Africa Oil Corp

BlackRock

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, BlackRock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with BlackRock and Africa Oil

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

The idea behind BlackRock and Africa Oil 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.