Correlation Between APA and Aker BP
Can any of the company-specific risk be diversified away by investing in both APA and Aker BP 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 Aker BP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and Aker BP ASA, you can compare the effects of market volatilities on APA and Aker BP 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 Aker BP. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Aker BP.
Diversification Opportunities for APA and Aker BP
Modest diversification
The 3 months correlation between APA and Aker is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA 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 Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of APA i.e., APA and Aker BP go up and down completely randomly.
Pair Corralation between APA and Aker BP
Considering the 90-day investment horizon APA Corporation is expected to under-perform the Aker BP. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.38 times less risky than Aker BP. The stock trades about -0.04 of its potential returns per unit of risk. The Aker BP ASA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,257 in Aker BP ASA on August 30, 2024 and sell it today you would lose (215.00) from holding Aker BP ASA or give up 17.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 92.93% |
| Values | Daily Returns |
APA Corp. vs. Aker BP ASA
Performance |
| Timeline |
| APA Corporation |
| Aker BP ASA |
APA and Aker BP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Aker BP
The main advantage of trading using opposite APA and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Aker BP 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 Aker BP will offset losses from the drop in Aker BP's long position.The idea behind APA Corporation and Aker BP ASA 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.| Aker BP vs. Boyd Gaming | Aker BP vs. Old Dominion Freight | Aker BP vs. Wicket Gaming AB | Aker BP vs. GameStop Corp |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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