Correlation Between APA and PetroTal Corp
Can any of the company-specific risk be diversified away by investing in both APA and PetroTal Corp 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 PetroTal Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and PetroTal Corp, you can compare the effects of market volatilities on APA and PetroTal Corp 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 PetroTal Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and PetroTal Corp.
Diversification Opportunities for APA and PetroTal Corp
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between APA and PetroTal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and PetroTal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroTal 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 PetroTal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroTal Corp has no effect on the direction of APA i.e., APA and PetroTal Corp go up and down completely randomly.
Pair Corralation between APA and PetroTal Corp
Considering the 90-day investment horizon APA Corporation is expected to under-perform the PetroTal Corp. In addition to that, APA is 1.02 times more volatile than PetroTal Corp. It trades about -0.04 of its total potential returns per unit of risk. PetroTal Corp is currently generating about 0.03 per unit of volatility. If you would invest 36.00 in PetroTal Corp on August 30, 2024 and sell it today you would earn a total of 8.00 from holding PetroTal Corp or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. PetroTal Corp
Performance |
| Timeline |
| APA Corporation |
| PetroTal Corp |
APA and PetroTal Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and PetroTal Corp
The main advantage of trading using opposite APA and PetroTal Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, PetroTal Corp 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 PetroTal Corp will offset losses from the drop in PetroTal Corp's long position.The idea behind APA Corporation and PetroTal 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.| PetroTal Corp vs. Africa Oil Corp | PetroTal Corp vs. Athabasca Oil Corp | PetroTal Corp vs. Gear Energy | PetroTal Corp vs. Journey 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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