Correlation Between Alphabet and APA

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

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

Diversification Opportunities for Alphabet and APA

0.71

Correlation Coefficient

Alphabet  APA

Poor diversification

The 3 months correlation between Alphabet and APA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and APA go up and down completely randomly.

Pair Corralation between Alphabet and APA

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the APA. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.28 times less risky than APA. The stock trades about -0.13 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  2,218  in APA Corporation on December 28, 2024 and sell it today you would lose (98.00) from holding APA Corporation or give up 4.42% of portfolio value over 90 days.

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

Alphabet Inc Class C  vs.  APA Corp.

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Alphabet and APA

The main advantage of trading using opposite Alphabet and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.