Correlation Between Gear Energy and Africa Oil

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

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

Diversification Opportunities for Gear Energy and Africa Oil

-0.05

Correlation Coefficient

Gear Energy  Africa Oil

Good diversification

The 3 months correlation between Gear and Africa is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Gear Energy 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 Gear Energy 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 Gear Energy 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 Gear Energy i.e., Gear Energy and Africa Oil go up and down completely randomly.

Pair Corralation between Gear Energy and Africa Oil

Assuming the 90 days trading horizon Gear Energy is expected to under-perform the Africa Oil. In addition to that, Gear Energy is 1.07 times more volatile than Africa Oil Corp. It trades about -0.09 of its total potential returns per unit of risk. Africa Oil Corp is currently generating about 0.04 per unit of volatility. If you would invest  188.00  in Africa Oil Corp on September 3, 2024 and sell it today you would earn a total of  9.00  from holding Africa Oil Corp or generate 4.79% return on investment over 90 days.

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

Gear Energy  vs.  Africa Oil Corp

Gear Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gear Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 very unfluctuating forward indicators, Africa Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gear Energy and Africa Oil

The main advantage of trading using opposite Gear Energy and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear Energy 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 Gear Energy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.