Correlation Between Caspian Services and Africa Oil

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

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

Diversification Opportunities for Caspian Services and Africa Oil

0.18

Correlation Coefficient

Caspian Services  Africa Oil

Average diversification

The 3 months correlation between Caspian and Africa is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Caspian Services 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 Caspian Services 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 Caspian Services 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 Caspian Services i.e., Caspian Services and Africa Oil go up and down completely randomly.

Pair Corralation between Caspian Services and Africa Oil

If you would invest  0.40  in Caspian Services on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Caspian Services or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Caspian Services  vs.  Africa Oil Corp

Caspian Services

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caspian Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Caspian Services showed solid returns over the last few months and may actually be approaching a breakup point.

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 Caspian Services and Africa Oil

The main advantage of trading using opposite Caspian Services and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caspian Services 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 Caspian Services 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.