Correlation Between APA and Hess
Can any of the company-specific risk be diversified away by investing in both APA and Hess 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 Hess into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and Hess Corporation, you can compare the effects of market volatilities on APA and Hess 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 Hess. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Hess.
Diversification Opportunities for APA and Hess
Very good diversification
The 3 months correlation between APA and Hess is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess 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 Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of APA i.e., APA and Hess go up and down completely randomly.
Pair Corralation between APA and Hess
Considering the 90-day investment horizon APA Corporation is expected to under-perform the Hess. In addition to that, APA is 2.76 times more volatile than Hess Corporation. It trades about -0.05 of its total potential returns per unit of risk. Hess Corporation is currently generating about 0.25 per unit of volatility. If you would invest 13,706 in Hess Corporation on August 28, 2024 and sell it today you would earn a total of 832.00 from holding Hess Corporation or generate 6.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
APA Corp. vs. Hess Corp.
Performance |
| Timeline |
| APA Corporation |
| Hess |
APA and Hess Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Hess
The main advantage of trading using opposite APA and Hess positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Hess 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 Hess will offset losses from the drop in Hess' long position.The idea behind APA Corporation and Hess Corporation 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.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |