Correlation Between APA and Pioneer Natural

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

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

Diversification Opportunities for APA and Pioneer Natural

-0.17

Correlation Coefficient

APA  Pioneer Natural

Good diversification

The 3 months correlation between APA and Pioneer is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Pioneer Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Natural Resources 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 Pioneer Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Natural Resources has no effect on the direction of APA i.e., APA and Pioneer Natural go up and down completely randomly.

Pair Corralation between APA and Pioneer Natural

Considering the 90-day investment horizon APA Corporation is expected to under-perform the Pioneer Natural. In addition to that, APA is 1.55 times more volatile than Pioneer Natural Resources. It trades about -0.03 of its total potential returns per unit of risk. Pioneer Natural Resources is currently generating about 0.06 per unit of volatility. If you would invest  21,056  in Pioneer Natural Resources on September 14, 2024 and sell it today you would earn a total of  747.00  from holding Pioneer Natural Resources or generate 3.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	10.94%
Values	Daily Returns

APA Corp.  vs.  Pioneer Natural Resources

APA Corporation

Risk-Adjusted Performance

0 of 100

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.

Pioneer Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pioneer Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Pioneer Natural is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with APA and Pioneer Natural

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

The idea behind APA Corporation and Pioneer Natural Resources 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.