Correlation Between APA and Callon Petroleum
Can any of the company-specific risk be diversified away by investing in both APA and Callon 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 Callon 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 Callon Petroleum, you can compare the effects of market volatilities on APA and Callon 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 Callon Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Callon Petroleum.
Diversification Opportunities for APA and Callon Petroleum
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between APA and Callon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Callon Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Callon Petroleum 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 Callon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Callon Petroleum has no effect on the direction of APA i.e., APA and Callon Petroleum go up and down completely randomly.
Pair Corralation between APA and Callon Petroleum
Considering the 90-day investment horizon APA Corporation is expected to under-perform the Callon Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.41 times less risky than Callon Petroleum. The stock trades about -0.03 of its potential returns per unit of risk. The Callon Petroleum is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 4,055 in Callon Petroleum on October 24, 2024 and sell it today you would lose (502.00) from holding Callon Petroleum or give up 12.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 24.09% |
| Values | Daily Returns |
APA Corp. vs. Callon Petroleum
Performance |
| Timeline |
| APA Corporation |
| Callon Petroleum |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
APA and Callon Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Callon Petroleum
The main advantage of trading using opposite APA and Callon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Callon 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 Callon Petroleum will offset losses from the drop in Callon Petroleum's long position.The idea behind APA Corporation and Callon Petroleum 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.| Callon Petroleum vs. SandRidge Energy | Callon Petroleum vs. Permian Resources | Callon Petroleum vs. Matador Resources | Callon Petroleum vs. Antero Resources 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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