Correlation Between Vaalco Energy and APA

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

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

Diversification Opportunities for Vaalco Energy and APA

0.74

Correlation Coefficient

Vaalco Energy  APA

Poor diversification

The 3 months correlation between Vaalco and APA is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vaalco Energy and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Vaalco 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 Vaalco 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 Vaalco Energy i.e., Vaalco Energy and APA go up and down completely randomly.

Pair Corralation between Vaalco Energy and APA

Considering the 90-day investment horizon Vaalco Energy is expected to under-perform the APA. In addition to that, Vaalco Energy is 1.13 times more volatile than APA Corporation. It trades about -0.04 of its total potential returns per unit of risk. APA Corporation is currently generating about 0.0 per unit of volatility. If you would invest  2,161  in APA Corporation on December 26, 2024 and sell it today you would lose (52.50) from holding APA Corporation or give up 2.43% of portfolio value over 90 days.

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

Vaalco Energy  vs.  APA Corp.

Vaalco Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vaalco Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Vaalco Energy and APA

The main advantage of trading using opposite Vaalco Energy and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vaalco 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 Vaalco 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.