Correlation Between California Resources and APA
Can any of the company-specific risk be diversified away by investing in both California Resources 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 California Resources and APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Resources Corp and APA Corporation, you can compare the effects of market volatilities on California Resources 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 California Resources with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Resources and APA.
Diversification Opportunities for California Resources and APA
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between California and APA is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and California Resources 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 California Resources Corp 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 California Resources i.e., California Resources and APA go up and down completely randomly.
Pair Corralation between California Resources and APA
Considering the 90-day investment horizon California Resources Corp is expected to generate 0.92 times more return on investment than APA. However, California Resources Corp is 1.08 times less risky than APA. It trades about 0.05 of its potential returns per unit of risk. APA Corporation is currently generating about -0.04 per unit of risk. If you would invest 4,034 in California Resources Corp on August 27, 2024 and sell it today you would earn a total of 1,925 from holding California Resources Corp or generate 47.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Resources Corp vs. APA Corp.
Performance |
| Timeline |
| California Resources Corp |
| APA Corporation |
California Resources and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Resources and APA
The main advantage of trading using opposite California Resources and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Resources 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.| California Resources vs. Devon Energy | California Resources vs. ConocoPhillips | California Resources vs. Occidental Petroleum | California Resources 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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