Correlation Between Hexagon AB and Africa Oil

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

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

Diversification Opportunities for Hexagon AB and Africa Oil

-0.59

Correlation Coefficient

Hexagon AB  Africa Oil

Excellent diversification

The 3 months correlation between Hexagon and Africa is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hexagon AB 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 Hexagon AB 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 Hexagon AB 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 Hexagon AB i.e., Hexagon AB and Africa Oil go up and down completely randomly.

Pair Corralation between Hexagon AB and Africa Oil

Assuming the 90 days trading horizon Hexagon AB is expected to generate 1.06 times more return on investment than Africa Oil. However, Hexagon AB is 1.06 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 0.04 per unit of risk. If you would invest  10,085  in Hexagon AB on September 13, 2024 and sell it today you would earn a total of  815.00  from holding Hexagon AB or generate 8.08% return on investment over 90 days.

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

Hexagon AB  vs.  Africa Oil Corp

Hexagon AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hexagon AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hexagon AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Africa Oil Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Oil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Africa Oil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hexagon AB and Africa Oil

The main advantage of trading using opposite Hexagon AB and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hexagon AB 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 Hexagon AB 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.