Correlation Between APA and WEG SA
Can any of the company-specific risk be diversified away by investing in both APA and WEG SA 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 WEG SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and WEG SA, you can compare the effects of market volatilities on APA and WEG SA 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 WEG SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and WEG SA.
Diversification Opportunities for APA and WEG SA
Pay attention - limited upside
The 3 months correlation between APA and WEG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and WEG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEG 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 WEG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEG SA has no effect on the direction of APA i.e., APA and WEG SA go up and down completely randomly.
Pair Corralation between APA and WEG SA
Assuming the 90 days trading horizon APA Corporation is expected to under-perform the WEG SA. In addition to that, APA is 1.38 times more volatile than WEG SA. It trades about -0.11 of its total potential returns per unit of risk. WEG SA is currently generating about 0.14 per unit of volatility. If you would invest 5,208 in WEG SA on September 26, 2024 and sell it today you would earn a total of 216.00 from holding WEG SA or generate 4.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. WEG SA
Performance |
| Timeline |
| APA Corporation |
| WEG SA |
APA and WEG SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and WEG SA
The main advantage of trading using opposite APA and WEG SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, WEG SA 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 WEG SA will offset losses from the drop in WEG SA's long position.The idea behind APA Corporation and WEG 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.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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