Correlation Between APA and Prairie Provident
Can any of the company-specific risk be diversified away by investing in both APA and Prairie Provident 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 Prairie Provident into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and Prairie Provident Resources, you can compare the effects of market volatilities on APA and Prairie Provident 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 Prairie Provident. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Prairie Provident.
Diversification Opportunities for APA and Prairie Provident
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between APA and Prairie is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Prairie Provident Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prairie Provident 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 Prairie Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prairie Provident has no effect on the direction of APA i.e., APA and Prairie Provident go up and down completely randomly.
Pair Corralation between APA and Prairie Provident
Considering the 90-day investment horizon APA Corporation is expected to under-perform the Prairie Provident. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 3.41 times less risky than Prairie Provident. The stock trades about -0.05 of its potential returns per unit of risk. The Prairie Provident Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2.50 in Prairie Provident Resources on September 1, 2024 and sell it today you would lose (0.30) from holding Prairie Provident Resources or give up 12.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. Prairie Provident Resources
Performance |
| Timeline |
| APA Corporation |
| Prairie Provident |
APA and Prairie Provident Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Prairie Provident
The main advantage of trading using opposite APA and Prairie Provident positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Prairie Provident 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 Prairie Provident will offset losses from the drop in Prairie Provident's long position.The idea behind APA Corporation and Prairie Provident Resources 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.| Prairie Provident vs. San Leon Energy | Prairie Provident vs. Enwell Energy plc | Prairie Provident vs. Dno ASA | Prairie Provident vs. Questerre Energy |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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