Correlation Between Barnwell Industries and APA
Can any of the company-specific risk be diversified away by investing in both Barnwell Industries and APA 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 Barnwell Industries and APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnwell Industries and APA Corporation, you can compare the effects of market volatilities on Barnwell Industries and APA 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 Barnwell Industries with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnwell Industries and APA.
Diversification Opportunities for Barnwell Industries and APA
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Barnwell and APA is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Barnwell Industries and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Barnwell Industries 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 Barnwell Industries are associated (or correlated) with APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Barnwell Industries i.e., Barnwell Industries and APA go up and down completely randomly.
Pair Corralation between Barnwell Industries and APA
Considering the 90-day investment horizon Barnwell Industries is expected to under-perform the APA. But the stock apears to be less risky and, when comparing its historical volatility, Barnwell Industries is 1.15 times less risky than APA. The stock trades about -0.15 of its potential returns per unit of risk. The APA Corporation is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,331 in APA Corporation on August 30, 2024 and sell it today you would lose (79.00) from holding APA Corporation or give up 3.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barnwell Industries vs. APA Corp.
Performance |
| Timeline |
| Barnwell Industries |
| APA Corporation |
Barnwell Industries and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barnwell Industries and APA
The main advantage of trading using opposite Barnwell Industries and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnwell Industries position performs unexpectedly, APA 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 APA will offset losses from the drop in APA's long position.| Barnwell Industries vs. Devon Energy | Barnwell Industries vs. ConocoPhillips | Barnwell Industries vs. Diamondback Energy | Barnwell Industries vs. Occidental Petroleum |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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