Correlation Between APA and Santos

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

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

Diversification Opportunities for APA and Santos

-0.79

Correlation Coefficient

APA  Santos

Pay attention - limited upside

The 3 months correlation between APA and Santos is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Santos Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos Ltd ADR 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 Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos Ltd ADR has no effect on the direction of APA i.e., APA and Santos go up and down completely randomly.

Pair Corralation between APA and Santos

If you would invest  538.00  in Santos Ltd ADR on September 30, 2024 and sell it today you would earn a total of  0.00  from holding Santos Ltd ADR or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

APA Corp.  vs.  Santos Ltd ADR

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 latest unfluctuating 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.

Santos Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santos Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Santos 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 Santos

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

The idea behind APA Corporation and Santos Ltd ADR 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.