Correlation Between APA and Empire Petroleum
Can any of the company-specific risk be diversified away by investing in both APA and Empire 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 Empire 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 Empire Petroleum Corp, you can compare the effects of market volatilities on APA and Empire 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 Empire Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Empire Petroleum.
Diversification Opportunities for APA and Empire Petroleum
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between APA and Empire is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Empire Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire 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 Empire Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Petroleum Corp has no effect on the direction of APA i.e., APA and Empire Petroleum go up and down completely randomly.
Pair Corralation between APA and Empire Petroleum
Considering the 90-day investment horizon APA Corporation is expected to under-perform the Empire Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.83 times less risky than Empire Petroleum. The stock trades about -0.04 of its potential returns per unit of risk. The Empire Petroleum Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 593.00 in Empire Petroleum Corp on August 27, 2024 and sell it today you would lose (4.00) from holding Empire Petroleum Corp or give up 0.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. Empire Petroleum Corp
Performance |
| Timeline |
| APA Corporation |
| Empire Petroleum Corp |
APA and Empire Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Empire Petroleum
The main advantage of trading using opposite APA and Empire Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Empire 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 Empire Petroleum will offset losses from the drop in Empire Petroleum's long position.The idea behind APA Corporation and Empire 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.| Empire Petroleum vs. PHX Minerals | Empire Petroleum vs. Mexco Energy | Empire Petroleum vs. Granite Ridge Resources | Empire Petroleum vs. XXL Energy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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