Correlation Between APA and CGX Energy
Can any of the company-specific risk be diversified away by investing in both APA and CGX Energy 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 CGX Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and CGX Energy, you can compare the effects of market volatilities on APA and CGX Energy 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 CGX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and CGX Energy.
Diversification Opportunities for APA and CGX Energy
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between APA and CGX is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and CGX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGX Energy 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 CGX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGX Energy has no effect on the direction of APA i.e., APA and CGX Energy go up and down completely randomly.
Pair Corralation between APA and CGX Energy
Considering the 90-day investment horizon APA Corporation is expected to generate 0.4 times more return on investment than CGX Energy. However, APA Corporation is 2.5 times less risky than CGX Energy. It trades about -0.04 of its potential returns per unit of risk. CGX Energy is currently generating about -0.03 per unit of risk. If you would invest 3,949 in APA Corporation on August 30, 2024 and sell it today you would lose (1,697) from holding APA Corporation or give up 42.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. CGX Energy
Performance |
| Timeline |
| APA Corporation |
| CGX Energy |
APA and CGX Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and CGX Energy
The main advantage of trading using opposite APA and CGX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, CGX Energy 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 CGX Energy will offset losses from the drop in CGX Energy's long position.The idea behind APA Corporation and CGX Energy 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.| CGX Energy vs. Yamaha Motor Co | CGX Energy vs. Nitto Denko Corp | CGX Energy vs. Farmers Merchants Bancorp | CGX Energy vs. Furukawa Electric Co |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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