Correlation Between Cabot Oil and APA
Can any of the company-specific risk be diversified away by investing in both Cabot Oil 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 Cabot Oil and APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cabot Oil Gas and APA Corporation, you can compare the effects of market volatilities on Cabot Oil 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 Cabot Oil with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot Oil and APA.
Diversification Opportunities for Cabot Oil and APA
Excellent diversification
The 3 months correlation between Cabot and APA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cabot Oil Gas and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Cabot Oil 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 Cabot Oil Gas 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 Cabot Oil i.e., Cabot Oil and APA go up and down completely randomly.
Pair Corralation between Cabot Oil and APA
Assuming the 90 days trading horizon Cabot Oil Gas is expected to generate 0.67 times more return on investment than APA. However, Cabot Oil Gas is 1.5 times less risky than APA. It trades about 0.05 of its potential returns per unit of risk. APA Corporation is currently generating about -0.03 per unit of risk. If you would invest 44,905 in Cabot Oil Gas on September 12, 2024 and sell it today you would earn a total of 9,395 from holding Cabot Oil Gas or generate 20.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Cabot Oil Gas vs. APA Corp.
Performance |
| Timeline |
| Cabot Oil Gas |
| APA Corporation |
Cabot Oil and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabot Oil and APA
The main advantage of trading using opposite Cabot Oil and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot Oil 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.The idea behind Cabot Oil Gas and APA Corporation 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.| APA vs. Cognizant Technology Solutions | APA vs. Grupo Sports World | APA vs. United States Steel | APA vs. Samsung Electronics Co |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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