Correlation Between APA and Tamboran Resources

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

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

Diversification Opportunities for APA and Tamboran Resources

0.37

Correlation Coefficient

APA  Tamboran Resources

Weak diversification

The 3 months correlation between APA and Tamboran is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Tamboran Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamboran 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 Tamboran Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamboran Resources has no effect on the direction of APA i.e., APA and Tamboran Resources go up and down completely randomly.

Pair Corralation between APA and Tamboran Resources

Considering the 90-day investment horizon APA Corporation is expected to under-perform the Tamboran Resources. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.88 times less risky than Tamboran Resources. The stock trades about -0.05 of its potential returns per unit of risk. The Tamboran Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,404  in Tamboran Resources on December 3, 2024 and sell it today you would earn a total of  122.00  from holding Tamboran Resources or generate 5.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

APA Corp.  vs.  Tamboran Resources

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.

Tamboran Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tamboran Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, Tamboran Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APA and Tamboran Resources

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

The idea behind APA Corporation and Tamboran 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.