Correlation Between APA and Petroreconcavo
Can any of the company-specific risk be diversified away by investing in both APA and Petroreconcavo 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 Petroreconcavo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and Petroreconcavo SA, you can compare the effects of market volatilities on APA and Petroreconcavo 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 Petroreconcavo. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Petroreconcavo.
Diversification Opportunities for APA and Petroreconcavo
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between APA and Petroreconcavo is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Petroreconcavo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroreconcavo SA 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 Petroreconcavo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroreconcavo SA has no effect on the direction of APA i.e., APA and Petroreconcavo go up and down completely randomly.
Pair Corralation between APA and Petroreconcavo
Assuming the 90 days trading horizon APA Corporation is expected to generate 1.5 times more return on investment than Petroreconcavo. However, APA is 1.5 times more volatile than Petroreconcavo SA. It trades about 0.16 of its potential returns per unit of risk. Petroreconcavo SA is currently generating about 0.11 per unit of risk. If you would invest 13,481 in APA Corporation on October 16, 2024 and sell it today you would earn a total of 1,147 from holding APA Corporation or generate 8.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. Petroreconcavo SA
Performance |
| Timeline |
| APA Corporation |
| Petroreconcavo SA |
APA and Petroreconcavo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Petroreconcavo
The main advantage of trading using opposite APA and Petroreconcavo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Petroreconcavo 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 Petroreconcavo will offset losses from the drop in Petroreconcavo's long position.The idea behind APA Corporation and Petroreconcavo SA 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.| Petroreconcavo vs. Occidental Petroleum | Petroreconcavo vs. Devon Energy | Petroreconcavo vs. Diamondback Energy, | Petroreconcavo vs. APA Corporation |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |