Correlation Between Africa Energy and Enwell Energy

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

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

Diversification Opportunities for Africa Energy and Enwell Energy

0.0

Correlation Coefficient

Africa Energy  Enwell Energy

Pay attention - limited upside

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

Pair Corralation between Africa Energy and Enwell Energy

If you would invest  1.70  in Africa Energy Corp on December 29, 2024 and sell it today you would earn a total of  0.80  from holding Africa Energy Corp or generate 47.06% return on investment over 90 days.

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

Africa Energy Corp  vs.  Enwell Energy plc

Africa Energy Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Energy Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Africa Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Enwell Energy plc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Africa Energy and Enwell Energy

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

The idea behind Africa Energy Corp and Enwell Energy plc 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.