Correlation Between APA and Snam SpA

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

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

Diversification Opportunities for APA and Snam SpA

0.61

Correlation Coefficient

APA  Snam SpA

Poor diversification

The 3 months correlation between APA and Snam is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding APA Group and Snam SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snam SpA 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 Snam SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snam SpA has no effect on the direction of APA i.e., APA and Snam SpA go up and down completely randomly.

Pair Corralation between APA and Snam SpA

Assuming the 90 days horizon APA Group is expected to generate 1.62 times more return on investment than Snam SpA. However, APA is 1.62 times more volatile than Snam SpA. It trades about 0.12 of its potential returns per unit of risk. Snam SpA is currently generating about 0.16 per unit of risk. If you would invest  394.00  in APA Group on December 27, 2024 and sell it today you would earn a total of  57.00  from holding APA Group or generate 14.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

APA Group  vs.  Snam SpA

APA Group

Risk-Adjusted Performance

OK

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

Snam SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Snam SpA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Snam SpA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with APA and Snam SpA

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

The idea behind APA Group and Snam SpA 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.