Correlation Between East Africa and Global Energy
Can any of the company-specific risk be diversified away by investing in both East Africa and Global 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 East Africa and Global Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Africa Metals and Global Energy Metals, you can compare the effects of market volatilities on East Africa and Global 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 East Africa with a short position of Global Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and Global Energy.
Diversification Opportunities for East Africa and Global Energy
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between East and Global is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Global Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Energy Metals and East Africa 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 East Africa Metals are associated (or correlated) with Global Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Energy Metals has no effect on the direction of East Africa i.e., East Africa and Global Energy go up and down completely randomly.
Pair Corralation between East Africa and Global Energy
Assuming the 90 days horizon East Africa Metals is expected to under-perform the Global Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, East Africa Metals is 3.42 times less risky than Global Energy. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Global Energy Metals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1.42 in Global Energy Metals on September 15, 2024 and sell it today you would earn a total of 0.16 from holding Global Energy Metals or generate 11.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
East Africa Metals vs. Global Energy Metals
Performance |
Timeline |
East Africa Metals |
Global Energy Metals |
East Africa and Global Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with East Africa and Global Energy
The main advantage of trading using opposite East Africa and Global Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa position performs unexpectedly, Global 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 Global Energy will offset losses from the drop in Global Energy's long position.East Africa vs. Pasinex Resources Limited | East Africa vs. Commander Resources | East Africa vs. Forsys Metals Corp | East Africa vs. American CuMo Mining |
Global Energy vs. Qubec Nickel Corp | Global Energy vs. IGO Limited | Global Energy vs. Focus Graphite | Global Energy vs. Mineral Res |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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