Correlation Between ROK Resources and Africa Energy

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

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

Diversification Opportunities for ROK Resources and Africa Energy

-0.19

Correlation Coefficient

ROK Resources  Africa Energy

Good diversification

The 3 months correlation between ROK and Africa is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ROK Resources 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 ROK Resources 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 ROK Resources 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 ROK Resources i.e., ROK Resources and Africa Energy go up and down completely randomly.

Pair Corralation between ROK Resources and Africa Energy

Assuming the 90 days horizon ROK Resources is expected to generate 11.16 times less return on investment than Africa Energy. But when comparing it to its historical volatility, ROK Resources is 2.01 times less risky than Africa Energy. It trades about 0.02 of its potential returns per unit of risk. Africa Energy Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.60  in Africa Energy Corp on December 25, 2024 and sell it today you would earn a total of  0.81  from holding Africa Energy Corp or generate 50.63% return on investment over 90 days.

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

ROK Resources  vs.  Africa Energy Corp

ROK Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ROK Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ROK Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with ROK Resources and Africa Energy

The main advantage of trading using opposite ROK Resources and Africa Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ROK Resources 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 ROK Resources 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.