Correlation Between APA and Gulfport Energy

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

Diversification Opportunities for APA and Gulfport Energy

0.82

Correlation Coefficient

APA  Gulfport Energy

Very poor diversification

The 3 months correlation between APA and Gulfport is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Gulfport Energy Operating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulfport Energy Operating 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 Gulfport Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulfport Energy Operating has no effect on the direction of APA i.e., APA and Gulfport Energy go up and down completely randomly.

Pair Corralation between APA and Gulfport Energy

Considering the 90-day investment horizon APA Corporation is expected to generate 1.01 times more return on investment than Gulfport Energy. However, APA is 1.01 times more volatile than Gulfport Energy Operating. It trades about 0.0 of its potential returns per unit of risk. Gulfport Energy Operating is currently generating about -0.01 per unit of risk. If you would invest  2,241  in APA Corporation on November 28, 2024 and sell it today you would lose (39.00) from holding APA Corporation or give up 1.74% of portfolio value over 90 days.

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

APA Corp.  vs.  Gulfport Energy Operating

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 somewhat strong basic indicators, APA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Gulfport Energy Operating

Risk-Adjusted Performance

Weak

Over the last 90 days Gulfport Energy Operating has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Gulfport Energy is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with APA and Gulfport Energy

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

The idea behind APA Corporation and Gulfport Energy Operating 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.