Correlation Between APA and Frontera Energy
Can any of the company-specific risk be diversified away by investing in both APA and Frontera 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 Frontera 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 Frontera Energy Corp, you can compare the effects of market volatilities on APA and Frontera 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 Frontera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Frontera Energy.
Diversification Opportunities for APA and Frontera Energy
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between APA and Frontera is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Frontera Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontera Energy 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 Frontera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontera Energy Corp has no effect on the direction of APA i.e., APA and Frontera Energy go up and down completely randomly.
Pair Corralation between APA and Frontera Energy
Considering the 90-day investment horizon APA Corporation is expected to under-perform the Frontera Energy. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.13 times less risky than Frontera Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Frontera Energy Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 724.00 in Frontera Energy Corp on August 30, 2024 and sell it today you would lose (161.00) from holding Frontera Energy Corp or give up 22.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. Frontera Energy Corp
Performance |
| Timeline |
| APA Corporation |
| Frontera Energy Corp |
APA and Frontera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Frontera Energy
The main advantage of trading using opposite APA and Frontera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Frontera 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 Frontera Energy will offset losses from the drop in Frontera Energy's long position.The idea behind APA Corporation and Frontera Energy 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.| Frontera Energy vs. CGX Energy | Frontera Energy vs. Athabasca Oil Corp | Frontera Energy vs. Africa Oil Corp | Frontera Energy vs. MEG 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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