Correlation Between Divio Technologies and Africa Oil

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

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

Diversification Opportunities for Divio Technologies and Africa Oil

-0.59

Correlation Coefficient

Divio Technologies  Africa Oil

Excellent diversification

The 3 months correlation between Divio and Africa is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Divio Technologies AB 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 Divio Technologies 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 Divio Technologies AB 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 Divio Technologies i.e., Divio Technologies and Africa Oil go up and down completely randomly.

Pair Corralation between Divio Technologies and Africa Oil

Assuming the 90 days trading horizon Divio Technologies AB is expected to generate 3.62 times more return on investment than Africa Oil. However, Divio Technologies is 3.62 times more volatile than Africa Oil Corp. It trades about -0.03 of its potential returns per unit of risk. Africa Oil Corp is currently generating about -0.28 per unit of risk. If you would invest  15.00  in Divio Technologies AB on September 25, 2024 and sell it today you would lose (1.00) from holding Divio Technologies AB or give up 6.67% of portfolio value over 90 days.

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

Divio Technologies AB  vs.  Africa Oil Corp

Divio Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Divio Technologies AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Africa Oil Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Oil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Africa Oil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Divio Technologies and Africa Oil

The main advantage of trading using opposite Divio Technologies and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Divio Technologies 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 Divio Technologies AB 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.