Correlation Between Pine Cliff and Africa Energy

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

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

Diversification Opportunities for Pine Cliff and Africa Energy

-0.33

Correlation Coefficient

Pine Cliff  Africa Energy

Very good diversification

The 3 months correlation between Pine and Africa is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy 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 Pine Cliff 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 Pine Cliff Energy 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 Pine Cliff i.e., Pine Cliff and Africa Energy go up and down completely randomly.

Pair Corralation between Pine Cliff and Africa Energy

Assuming the 90 days trading horizon Pine Cliff Energy is expected to under-perform the Africa Energy. But the stock apears to be less risky and, when comparing its historical volatility, Pine Cliff Energy is 3.72 times less risky than Africa Energy. The stock trades about -0.2 of its potential returns per unit of risk. The Africa Energy Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Africa Energy Corp on December 29, 2024 and sell it today you would earn a total of  1.00  from holding Africa Energy Corp or generate 33.33% return on investment over 90 days.

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

Pine Cliff Energy  vs.  Africa Energy Corp

Pine Cliff Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pine Cliff Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 fairly unfluctuating basic indicators, Africa Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pine Cliff and Africa Energy

The main advantage of trading using opposite Pine Cliff and Africa Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pine Cliff 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 Pine Cliff Energy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.