Correlation Between APA and Berry Petroleum
Can any of the company-specific risk be diversified away by investing in both APA and Berry Petroleum 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 Berry Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and Berry Petroleum Corp, you can compare the effects of market volatilities on APA and Berry Petroleum 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 Berry Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Berry Petroleum.
Diversification Opportunities for APA and Berry Petroleum
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between APA and Berry is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Berry Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berry Petroleum Corp 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 Berry Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berry Petroleum Corp has no effect on the direction of APA i.e., APA and Berry Petroleum go up and down completely randomly.
Pair Corralation between APA and Berry Petroleum
Considering the 90-day investment horizon APA Corporation is expected to generate 0.8 times more return on investment than Berry Petroleum. However, APA Corporation is 1.24 times less risky than Berry Petroleum. It trades about -0.05 of its potential returns per unit of risk. Berry Petroleum Corp is currently generating about -0.27 per unit of risk. If you would invest 2,370 in APA Corporation on August 28, 2024 and sell it today you would lose (102.00) from holding APA Corporation or give up 4.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. Berry Petroleum Corp
Performance |
| Timeline |
| APA Corporation |
| Berry Petroleum Corp |
APA and Berry Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Berry Petroleum
The main advantage of trading using opposite APA and Berry Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Berry Petroleum 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 Berry Petroleum will offset losses from the drop in Berry Petroleum's long position.The idea behind APA Corporation and Berry Petroleum Corp 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.| Berry Petroleum vs. California Resources Corp | Berry Petroleum vs. Magnolia Oil Gas | Berry Petroleum vs. Comstock Resources | Berry Petroleum vs. Gulfport Energy Operating |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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