Correlation Between APA and Molson Coors

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

By analyzing existing cross correlation between APA Corporation and Molson Coors Beverage, you can compare the effects of market volatilities on APA and Molson Coors 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 Molson Coors. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Molson Coors.

Diversification Opportunities for APA and Molson Coors

-0.39

Correlation Coefficient

APA  Molson Coors

Very good diversification

The 3 months correlation between APA and Molson is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of APA i.e., APA and Molson Coors go up and down completely randomly.

Pair Corralation between APA and Molson Coors

Assuming the 90 days trading horizon APA Corporation is expected to generate 24.89 times more return on investment than Molson Coors. However, APA is 24.89 times more volatile than Molson Coors Beverage. It trades about 0.15 of its potential returns per unit of risk. Molson Coors Beverage is currently generating about 0.24 per unit of risk. If you would invest  13,437  in APA Corporation on October 5, 2024 and sell it today you would earn a total of  1,221  from holding APA Corporation or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

APA Corp.  vs.  Molson Coors Beverage

APA Corporation

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days APA Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Molson Coors Beverage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Molson Coors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with APA and Molson Coors

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

The idea behind APA Corporation and Molson Coors Beverage 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.