Correlation Between Africa Oil and Best Buy

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Can any of the company-specific risk be diversified away by investing in both Africa Oil and Best Buy 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 Best Buy 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 Best Buy Co, you can compare the effects of market volatilities on Africa Oil and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Best Buy.

Diversification Opportunities for Africa Oil and Best Buy

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Africa and Best is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Africa Oil i.e., Africa Oil and Best Buy go up and down completely randomly.

Pair Corralation between Africa Oil and Best Buy

Assuming the 90 days trading horizon Africa Oil Corp is expected to generate 1.18 times more return on investment than Best Buy. However, Africa Oil is 1.18 times more volatile than Best Buy Co. It trades about 0.35 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.12 per unit of risk. If you would invest  1,625  in Africa Oil Corp on December 30, 2023 and sell it today you would earn a total of  267.00  from holding Africa Oil Corp or generate 16.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Africa Oil Corp  vs.  Best Buy Co

 Performance 
       Timeline  
Africa Oil Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Africa Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Africa Oil is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Best Buy 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Best Buy may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Africa Oil and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Africa Oil and Best Buy

The main advantage of trading using opposite Africa Oil and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Oil position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
The idea behind Africa Oil Corp and Best Buy Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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