Correlation Between APA and Atmos Energy

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

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

Diversification Opportunities for APA and Atmos Energy

-0.39

Correlation Coefficient

APA  Atmos Energy

Very good diversification

The 3 months correlation between APA and Atmos is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding APA Group and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy 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 Group are associated (or correlated) with Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of APA i.e., APA and Atmos Energy go up and down completely randomly.

Pair Corralation between APA and Atmos Energy

Assuming the 90 days horizon APA Group is expected to generate 2.17 times more return on investment than Atmos Energy. However, APA is 2.17 times more volatile than Atmos Energy. It trades about -0.07 of its potential returns per unit of risk. Atmos Energy is currently generating about -0.31 per unit of risk. If you would invest  437.00  in APA Group on September 25, 2024 and sell it today you would lose (16.00) from holding APA Group or give up 3.66% of portfolio value over 90 days.

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

APA Group  vs.  Atmos Energy

APA Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APA Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Atmos Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Atmos Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with APA and Atmos Energy

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

The idea behind APA Group and Atmos Energy 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.