Correlation Between Afcon Holdings and Bazan Oil
Can any of the company-specific risk be diversified away by investing in both Afcon Holdings and Bazan 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 Afcon Holdings and Bazan Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Afcon Holdings and Bazan Oil Refineries, you can compare the effects of market volatilities on Afcon Holdings and Bazan 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 Afcon Holdings with a short position of Bazan Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Afcon Holdings and Bazan Oil.
Diversification Opportunities for Afcon Holdings and Bazan Oil
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Afcon and Bazan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Afcon Holdings and Bazan Oil Refineries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bazan Oil Refineries and Afcon Holdings 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 Afcon Holdings are associated (or correlated) with Bazan Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bazan Oil Refineries has no effect on the direction of Afcon Holdings i.e., Afcon Holdings and Bazan Oil go up and down completely randomly.
Pair Corralation between Afcon Holdings and Bazan Oil
Assuming the 90 days trading horizon Afcon Holdings is expected to generate 0.26 times more return on investment than Bazan Oil. However, Afcon Holdings is 3.85 times less risky than Bazan Oil. It trades about -0.28 of its potential returns per unit of risk. Bazan Oil Refineries is currently generating about -0.16 per unit of risk. If you would invest 1,033,000 in Afcon Holdings on December 30, 2023 and sell it today you would lose (60,800) from holding Afcon Holdings or give up 5.89% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 94.74% |
Values | Daily Returns |
Afcon Holdings vs. Bazan Oil Refineries
Performance |
Timeline |
Afcon Holdings |
Bazan Oil Refineries |
Afcon Holdings and Bazan Oil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Afcon Holdings and Bazan Oil
The main advantage of trading using opposite Afcon Holdings and Bazan Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Afcon Holdings position performs unexpectedly, Bazan 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 Bazan Oil will offset losses from the drop in Bazan Oil's long position.Afcon Holdings vs. Black Sea Property | Afcon Holdings vs. Direct Capital Investments | Afcon Holdings vs. Aerodrome Group | Afcon Holdings vs. Israel China Biotechnology |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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