Correlation Between APA and Evolution Petroleum
Can any of the company-specific risk be diversified away by investing in both APA and Evolution 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 Evolution 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 Evolution Petroleum, you can compare the effects of market volatilities on APA and Evolution 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 Evolution Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Evolution Petroleum.
Diversification Opportunities for APA and Evolution Petroleum
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between APA and Evolution is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Evolution Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution 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 Evolution Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Petroleum has no effect on the direction of APA i.e., APA and Evolution Petroleum go up and down completely randomly.
Pair Corralation between APA and Evolution Petroleum
Considering the 90-day investment horizon APA Corporation is expected to under-perform the Evolution Petroleum. In addition to that, APA is 1.51 times more volatile than Evolution Petroleum. It trades about -0.05 of its total potential returns per unit of risk. Evolution Petroleum is currently generating about 0.29 per unit of volatility. If you would invest 519.00 in Evolution Petroleum on August 27, 2024 and sell it today you would earn a total of 67.00 from holding Evolution Petroleum or generate 12.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. Evolution Petroleum
Performance |
| Timeline |
| APA Corporation |
| Evolution Petroleum |
APA and Evolution Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Evolution Petroleum
The main advantage of trading using opposite APA and Evolution Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Evolution 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 Evolution Petroleum will offset losses from the drop in Evolution Petroleum's long position.The idea behind APA Corporation and Evolution 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.| Evolution Petroleum vs. Devon Energy | Evolution Petroleum vs. ConocoPhillips | Evolution Petroleum vs. Occidental Petroleum | Evolution Petroleum vs. Permian Resources |
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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