Correlation Between Africa Energy and ROK Resources
Can any of the company-specific risk be diversified away by investing in both Africa Energy and ROK Resources 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 ROK Resources 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 ROK Resources, you can compare the effects of market volatilities on Africa Energy and ROK Resources 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 ROK Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Energy and ROK Resources.
Diversification Opportunities for Africa Energy and ROK Resources
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Africa and ROK is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Africa Energy Corp and ROK Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROK Resources 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 ROK Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROK Resources has no effect on the direction of Africa Energy i.e., Africa Energy and ROK Resources go up and down completely randomly.
Pair Corralation between Africa Energy and ROK Resources
Assuming the 90 days horizon Africa Energy Corp is expected to generate 2.04 times more return on investment than ROK Resources. However, Africa Energy is 2.04 times more volatile than ROK Resources. It trades about 0.12 of its potential returns per unit of risk. ROK Resources is currently generating about -0.01 per unit of risk. If you would invest 1.70 in Africa Energy Corp on December 28, 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 | Moves Against |
Strength | Insignificant |
Accuracy | 96.67% |
Values | Daily Returns |
Africa Energy Corp vs. ROK Resources
Performance |
Timeline |
Africa Energy Corp |
ROK Resources |
Africa Energy and ROK Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Africa Energy and ROK Resources
The main advantage of trading using opposite Africa Energy and ROK Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Energy position performs unexpectedly, ROK Resources 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 ROK Resources will offset losses from the drop in ROK Resources' long position.Africa Energy vs. PetroShale | Africa Energy vs. Horizon Oil Limited | Africa Energy vs. Saturn Oil Gas | Africa Energy vs. San Leon Energy |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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