Correlation Between Africa Oil and Anfield Resources

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

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

Diversification Opportunities for Africa Oil and Anfield Resources

0.24

Correlation Coefficient

Africa Oil  Anfield Resources

Modest diversification

The 3 months correlation between Africa and Anfield is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Anfield Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anfield Resources and Africa 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 Africa Oil Corp are associated (or correlated) with Anfield Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anfield Resources has no effect on the direction of Africa Oil i.e., Africa Oil and Anfield Resources go up and down completely randomly.

Pair Corralation between Africa Oil and Anfield Resources

Assuming the 90 days horizon Africa Oil Corp is expected to generate 0.41 times more return on investment than Anfield Resources. However, Africa Oil Corp is 2.41 times less risky than Anfield Resources. It trades about -0.22 of its potential returns per unit of risk. Anfield Resources is currently generating about -0.41 per unit of risk. If you would invest  141.00  in Africa Oil Corp on September 24, 2024 and sell it today you would lose (12.00) from holding Africa Oil Corp or give up 8.51% of portfolio value over 90 days.

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

Africa Oil Corp  vs.  Anfield Resources

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.

Anfield Resources

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anfield Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Anfield Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Africa Oil and Anfield Resources

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

The idea behind Africa Oil Corp and Anfield Resources 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 CEOs Directory module to screen CEOs from public companies around the world.