Correlation Between Invictus Energy and Africa Oil

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

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

Diversification Opportunities for Invictus Energy and Africa Oil

-0.26

Correlation Coefficient

Invictus Energy  Africa Oil

Very good diversification

The 3 months correlation between Invictus and Africa is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Invictus Energy Limited 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 Invictus Energy 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 Invictus Energy Limited 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 Invictus Energy i.e., Invictus Energy and Africa Oil go up and down completely randomly.

Pair Corralation between Invictus Energy and Africa Oil

Assuming the 90 days horizon Invictus Energy Limited is expected to generate 3.88 times more return on investment than Africa Oil. However, Invictus Energy is 3.88 times more volatile than Africa Oil Corp. It trades about -0.06 of its potential returns per unit of risk. Africa Oil Corp is currently generating about -0.28 per unit of risk. If you would invest  4.70  in Invictus Energy Limited on September 22, 2024 and sell it today you would lose (0.70) from holding Invictus Energy Limited or give up 14.89% of portfolio value over 90 days.

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

Invictus Energy Limited  vs.  Africa Oil Corp

Invictus Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invictus Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company 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 Invictus Energy and Africa Oil

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

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.