Correlation Between Sabine Royalty and APA

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

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

Diversification Opportunities for Sabine Royalty and APA

-0.5

Correlation Coefficient

Sabine Royalty  APA

Very good diversification

The 3 months correlation between Sabine and APA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sabine Royalty Trust and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Sabine Royalty 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 Sabine Royalty Trust 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 Sabine Royalty i.e., Sabine Royalty and APA go up and down completely randomly.

Pair Corralation between Sabine Royalty and APA

Considering the 90-day investment horizon Sabine Royalty Trust is expected to generate 0.99 times more return on investment than APA. However, Sabine Royalty Trust is 1.01 times less risky than APA. It trades about 0.0 of its potential returns per unit of risk. APA Corporation is currently generating about -0.06 per unit of risk. If you would invest  6,395  in Sabine Royalty Trust on September 28, 2024 and sell it today you would lose (36.00) from holding Sabine Royalty Trust or give up 0.56% of portfolio value over 90 days.

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

Sabine Royalty Trust  vs.  APA Corp.

Sabine Royalty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Sabine Royalty is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sabine Royalty and APA

The main advantage of trading using opposite Sabine Royalty and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabine Royalty 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 Sabine Royalty Trust 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.