Correlation Between APA and Diamondback Energy,

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

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

Diversification Opportunities for APA and Diamondback Energy,

0.66

Correlation Coefficient

APA  Diamondback Energy,

Poor diversification

The 3 months correlation between APA and Diamondback is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Diamondback Energy, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback Energy, and APA 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 APA Corporation are associated (or correlated) with Diamondback Energy,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy, has no effect on the direction of APA i.e., APA and Diamondback Energy, go up and down completely randomly.

Pair Corralation between APA and Diamondback Energy,

Assuming the 90 days trading horizon APA Corporation is expected to generate 1.24 times more return on investment than Diamondback Energy,. However, APA is 1.24 times more volatile than Diamondback Energy,. It trades about -0.06 of its potential returns per unit of risk. Diamondback Energy, is currently generating about -0.11 per unit of risk. If you would invest  13,587  in APA Corporation on December 26, 2024 and sell it today you would lose (1,587) from holding APA Corporation or give up 11.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.67%
Values	Daily Returns

APA Corp.  vs.  Diamondback Energy,

APA Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days APA Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Diamondback Energy,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamondback Energy, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with APA and Diamondback Energy,

The main advantage of trading using opposite APA and Diamondback Energy, positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Diamondback Energy, 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 Diamondback Energy, will offset losses from the drop in Diamondback Energy,'s long position.

The idea behind APA Corporation and Diamondback Energy, 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.