Correlation Between East Africa and WT Offshore

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

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

Diversification Opportunities for East Africa and WT Offshore

0.0

Correlation Coefficient

East Africa  WT Offshore

Pay attention - limited upside

The 3 months correlation between East and WTI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and WT Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Offshore and East Africa 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 East Africa Metals are associated (or correlated) with WT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Offshore has no effect on the direction of East Africa i.e., East Africa and WT Offshore go up and down completely randomly.

Pair Corralation between East Africa and WT Offshore

Assuming the 90 days horizon East Africa Metals is expected to generate 20.85 times more return on investment than WT Offshore. However, East Africa is 20.85 times more volatile than WT Offshore. It trades about 0.09 of its potential returns per unit of risk. WT Offshore is currently generating about -0.06 per unit of risk. If you would invest  9.15  in East Africa Metals on October 15, 2024 and sell it today you would earn a total of  1.85  from holding East Africa Metals or generate 20.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

East Africa Metals  vs.  WT Offshore

East Africa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, East Africa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WT Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with East Africa and WT Offshore

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

The idea behind East Africa Metals and WT Offshore 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.