Correlation Between APA and EOG Resources
Can any of the company-specific risk be diversified away by investing in both APA and EOG Resources 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 EOG Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and EOG Resources, you can compare the effects of market volatilities on APA and EOG Resources 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 EOG Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and EOG Resources.
Diversification Opportunities for APA and EOG Resources
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between APA and EOG is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and EOG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG Resources 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 Corporation are associated (or correlated) with EOG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOG Resources has no effect on the direction of APA i.e., APA and EOG Resources go up and down completely randomly.
Pair Corralation between APA and EOG Resources
Assuming the 90 days trading horizon APA Corporation is expected to under-perform the EOG Resources. In addition to that, APA is 1.67 times more volatile than EOG Resources. It trades about -0.04 of its total potential returns per unit of risk. EOG Resources is currently generating about 0.08 per unit of volatility. If you would invest 29,392 in EOG Resources on September 28, 2024 and sell it today you would earn a total of 8,494 from holding EOG Resources or generate 28.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.17% |
| Values | Daily Returns |
APA Corp. vs. EOG Resources
Performance |
| Timeline |
| APA Corporation |
| EOG Resources |
APA and EOG Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and EOG Resources
The main advantage of trading using opposite APA and EOG Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, EOG Resources 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 EOG Resources will offset losses from the drop in EOG Resources' long position.The idea behind APA Corporation and EOG Resources 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.| EOG Resources vs. ConocoPhillips | EOG Resources vs. Occidental Petroleum | EOG Resources vs. Devon Energy | EOG Resources vs. H1ES34 |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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