Correlation Between Stamper Oil and Africa Oil

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

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

Diversification Opportunities for Stamper Oil and Africa Oil

-0.05

Correlation Coefficient

Stamper Oil  Africa Oil

Good diversification

The 3 months correlation between Stamper and Africa is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Stamper Oil Gas and Africa Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Oil Corp and Stamper Oil 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 Stamper Oil Gas are associated (or correlated) with Africa Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Oil Corp has no effect on the direction of Stamper Oil i.e., Stamper Oil and Africa Oil go up and down completely randomly.

Pair Corralation between Stamper Oil and Africa Oil

Assuming the 90 days horizon Stamper Oil Gas is expected to generate 27.15 times more return on investment than Africa Oil. However, Stamper Oil is 27.15 times more volatile than Africa Oil Corp. It trades about 0.07 of its potential returns per unit of risk. Africa Oil Corp is currently generating about -0.01 per unit of risk. If you would invest  23.00  in Stamper Oil Gas on September 22, 2024 and sell it today you would lose (22.00) from holding Stamper Oil Gas or give up 95.65% of portfolio value over 90 days.

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

Stamper Oil Gas  vs.  Africa Oil Corp

Stamper Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stamper Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Stamper Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Africa Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Africa Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Africa Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Stamper Oil and Africa Oil

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

The idea behind Stamper Oil Gas and Africa Oil 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.