Correlation Between APA and Southwestern Energy
Can any of the company-specific risk be diversified away by investing in both APA and Southwestern 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 Southwestern 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 Southwestern Energy, you can compare the effects of market volatilities on APA and Southwestern 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 Southwestern Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Southwestern Energy.
Diversification Opportunities for APA and Southwestern Energy
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between APA and Southwestern is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Southwestern Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwestern Energy 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 Southwestern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwestern Energy has no effect on the direction of APA i.e., APA and Southwestern Energy go up and down completely randomly.
Pair Corralation between APA and Southwestern Energy
If you would invest 711.00 in Southwestern Energy on November 3, 2024 and sell it today you would earn a total of 0.00 from holding Southwestern Energy or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 4.76% |
| Values | Daily Returns |
APA Corp. vs. Southwestern Energy
Performance |
| Timeline |
| APA Corporation |
| Southwestern Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
APA and Southwestern Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Southwestern Energy
The main advantage of trading using opposite APA and Southwestern Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Southwestern 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 Southwestern Energy will offset losses from the drop in Southwestern Energy's long position.The idea behind APA Corporation and Southwestern Energy 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.| Southwestern Energy vs. Antero Resources Corp | Southwestern Energy vs. EQT Corporation | Southwestern Energy vs. Matador Resources | Southwestern Energy vs. Range Resources 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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