Correlation Between CGX Energy and Africa Oil

Can any of the company-specific risk be diversified away by investing in both CGX 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 CGX 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 CGX Energy and Africa Oil Corp, you can compare the effects of market volatilities on CGX 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 CGX Energy with a short position of Africa Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of CGX Energy and Africa Oil.

Diversification Opportunities for CGX Energy and Africa Oil

0.39

Correlation Coefficient

CGX Energy  Africa Oil

Weak diversification

The 3 months correlation between CGX and Africa is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding CGX Energy 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 CGX 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 CGX Energy 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 CGX Energy i.e., CGX Energy and Africa Oil go up and down completely randomly.

Pair Corralation between CGX Energy and Africa Oil

Assuming the 90 days horizon CGX Energy is expected to under-perform the Africa Oil. In addition to that, CGX Energy is 1.28 times more volatile than Africa Oil Corp. It trades about -0.05 of its total potential returns per unit of risk. Africa Oil Corp is currently generating about 0.14 per unit of volatility. If you would invest  176.00  in Africa Oil Corp on September 13, 2024 and sell it today you would earn a total of  14.00  from holding Africa Oil Corp or generate 7.95% return on investment over 90 days.

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

CGX Energy  vs.  Africa Oil Corp

CGX Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CGX Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CGX Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Africa Oil Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Oil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Africa Oil is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CGX Energy and Africa Oil

The main advantage of trading using opposite CGX Energy and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CGX 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 CGX Energy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.