Correlation Between Africa Oil and Best Buy
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 Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Africa Oil Corp vs. Best Buy Co
Performance |
Timeline |
Africa Oil Corp |
Best Buy |
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.Africa Oil vs. Fractal Gaming Group | Africa Oil vs. Invisio Communications AB | Africa Oil vs. Soder Sportfiske AB | Africa Oil vs. Train Alliance Sweden |
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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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