Correlation Between Coterra Energy and APA

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

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

Diversification Opportunities for Coterra Energy and APA

0.36

Correlation Coefficient

Coterra Energy  APA

Weak diversification

The 3 months correlation between Coterra and APA is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Coterra Energy and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Coterra Energy 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 Coterra Energy 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 Coterra Energy i.e., Coterra Energy and APA go up and down completely randomly.

Pair Corralation between Coterra Energy and APA

Given the investment horizon of 90 days Coterra Energy is expected to generate 0.72 times more return on investment than APA. However, Coterra Energy is 1.39 times less risky than APA. It trades about 0.12 of its potential returns per unit of risk. APA Corporation is currently generating about -0.02 per unit of risk. If you would invest  2,531  in Coterra Energy on December 28, 2024 and sell it today you would earn a total of  321.00  from holding Coterra Energy or generate 12.68% return on investment over 90 days.

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

Coterra Energy  vs.  APA Corp.

Coterra Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coterra Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Coterra Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Coterra Energy and APA

The main advantage of trading using opposite Coterra Energy and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coterra Energy 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 Coterra Energy 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.