Correlation Between Caesars Entertainment, and APA

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

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

Diversification Opportunities for Caesars Entertainment, and APA

0.63

Correlation Coefficient

Caesars Entertainment,  APA

Poor diversification

The 3 months correlation between Caesars and APA is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Caesars Entertainment, and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Caesars Entertainment, 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 Caesars Entertainment, are associated (or correlated) with APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Caesars Entertainment, i.e., Caesars Entertainment, and APA go up and down completely randomly.

Pair Corralation between Caesars Entertainment, and APA

Assuming the 90 days trading horizon Caesars Entertainment, is expected to under-perform the APA. But the stock apears to be less risky and, when comparing its historical volatility, Caesars Entertainment, is 1.16 times less risky than APA. The stock trades about -0.12 of its potential returns per unit of risk. The APA Corporation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14,588  in APA Corporation on October 4, 2024 and sell it today you would earn a total of  70.00  from holding APA Corporation or generate 0.48% return on investment over 90 days.

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

Caesars Entertainment,  vs.  APA Corp.

Caesars Entertainment,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caesars Entertainment, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

APA Corporation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Caesars Entertainment, and APA

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

The idea behind Caesars Entertainment, and APA Corporation 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.