Correlation Between APA and S1NP34
Can any of the company-specific risk be diversified away by investing in both APA and S1NP34 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 S1NP34 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and S1NP34, you can compare the effects of market volatilities on APA and S1NP34 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 S1NP34. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and S1NP34.
Diversification Opportunities for APA and S1NP34
Very good diversification
The 3 months correlation between APA and S1NP34 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and S1NP34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S1NP34 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 S1NP34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S1NP34 has no effect on the direction of APA i.e., APA and S1NP34 go up and down completely randomly.
Pair Corralation between APA and S1NP34
Assuming the 90 days trading horizon APA Corporation is expected to under-perform the S1NP34. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.63 times less risky than S1NP34. The stock trades about -0.11 of its potential returns per unit of risk. The S1NP34 is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 79,972 in S1NP34 on September 27, 2024 and sell it today you would lose (4,147) from holding S1NP34 or give up 5.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. S1NP34
Performance |
| Timeline |
| APA Corporation |
| S1NP34 |
APA and S1NP34 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and S1NP34
The main advantage of trading using opposite APA and S1NP34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, S1NP34 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 S1NP34 will offset losses from the drop in S1NP34's long position.The idea behind APA Corporation and S1NP34 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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