Correlation Between PetroShale and APA

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

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

Diversification Opportunities for PetroShale and APA

0.71

Correlation Coefficient

PetroShale  APA

Poor diversification

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

Pair Corralation between PetroShale and APA

Assuming the 90 days horizon PetroShale is expected to under-perform the APA. But the otc stock apears to be less risky and, when comparing its historical volatility, PetroShale is 1.34 times less risky than APA. The otc stock trades about -0.08 of its potential returns per unit of risk. The APA Corporation is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,420  in APA Corporation on September 14, 2024 and sell it today you would lose (182.00) from holding APA Corporation or give up 7.52% of portfolio value over 90 days.

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

PetroShale  vs.  APA Corp.

PetroShale

Risk-Adjusted Performance

0 of 100

Very Weak

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

APA Corporation

Risk-Adjusted Performance

0 of 100

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 PetroShale and APA

The main advantage of trading using opposite PetroShale and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroShale 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 PetroShale 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.