Correlation Between APA and Texas Pacific
Can any of the company-specific risk be diversified away by investing in both APA and Texas Pacific 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 Texas Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and Texas Pacific Land, you can compare the effects of market volatilities on APA and Texas Pacific 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 Texas Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Texas Pacific.
Diversification Opportunities for APA and Texas Pacific
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between APA and Texas is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Texas Pacific Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Pacific Land 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 Texas Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Pacific Land has no effect on the direction of APA i.e., APA and Texas Pacific go up and down completely randomly.
Pair Corralation between APA and Texas Pacific
Considering the 90-day investment horizon APA Corporation is expected to under-perform the Texas Pacific. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.22 times less risky than Texas Pacific. The stock trades about -0.07 of its potential returns per unit of risk. The Texas Pacific Land is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 56,835 in Texas Pacific Land on August 27, 2024 and sell it today you would earn a total of 116,165 from holding Texas Pacific Land or generate 204.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. Texas Pacific Land
Performance |
| Timeline |
| APA Corporation |
| Texas Pacific Land |
APA and Texas Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Texas Pacific
The main advantage of trading using opposite APA and Texas Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Texas Pacific 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 Texas Pacific will offset losses from the drop in Texas Pacific's long position.The idea behind APA Corporation and Texas Pacific Land 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.| Texas Pacific vs. Devon Energy | Texas Pacific vs. ConocoPhillips | Texas Pacific vs. Occidental Petroleum | Texas Pacific vs. Permian Resources |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |