Correlation Between Invisio Communications and Africa Energy

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

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

Diversification Opportunities for Invisio Communications and Africa Energy

0.2

Correlation Coefficient

Invisio Communications  Africa Energy

Modest diversification

The 3 months correlation between Invisio and Africa is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Invisio Communications AB and Africa Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Energy Corp and Invisio Communications 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 Invisio Communications AB are associated (or correlated) with Africa Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Energy Corp has no effect on the direction of Invisio Communications i.e., Invisio Communications and Africa Energy go up and down completely randomly.

Pair Corralation between Invisio Communications and Africa Energy

Assuming the 90 days trading horizon Invisio Communications AB is expected to generate 0.61 times more return on investment than Africa Energy. However, Invisio Communications AB is 1.64 times less risky than Africa Energy. It trades about 0.22 of its potential returns per unit of risk. Africa Energy Corp is currently generating about 0.1 per unit of risk. If you would invest  27,550  in Invisio Communications AB on December 28, 2024 and sell it today you would earn a total of  12,250  from holding Invisio Communications AB or generate 44.46% return on investment over 90 days.

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

Invisio Communications AB  vs.  Africa Energy Corp

Invisio Communications

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invisio Communications AB are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invisio Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Africa Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invisio Communications and Africa Energy

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

The idea behind Invisio Communications AB and Africa Energy 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.