Correlation Between Naturgy Energy and APA
Can any of the company-specific risk be diversified away by investing in both Naturgy Energy 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 Naturgy Energy and APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naturgy Energy Group and APA Group, you can compare the effects of market volatilities on Naturgy Energy 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 Naturgy Energy with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naturgy Energy and APA.
Diversification Opportunities for Naturgy Energy and APA
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Naturgy and APA is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Naturgy Energy Group and APA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Group and Naturgy Energy 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 Naturgy Energy Group 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 Group has no effect on the direction of Naturgy Energy i.e., Naturgy Energy and APA go up and down completely randomly.
Pair Corralation between Naturgy Energy and APA
Assuming the 90 days horizon Naturgy Energy Group is expected to generate 0.3 times more return on investment than APA. However, Naturgy Energy Group is 3.38 times less risky than APA. It trades about -0.11 of its potential returns per unit of risk. APA Group is currently generating about -0.13 per unit of risk. If you would invest 493.00 in Naturgy Energy Group on August 28, 2024 and sell it today you would lose (18.00) from holding Naturgy Energy Group or give up 3.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Naturgy Energy Group vs. APA Group
Performance |
| Timeline |
| Naturgy Energy Group |
| APA Group |
Naturgy Energy and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naturgy Energy and APA
The main advantage of trading using opposite Naturgy Energy and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naturgy Energy 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.| Naturgy Energy vs. NewJersey Resources | Naturgy Energy vs. Atmos Energy | Naturgy Energy vs. UGI Corporation | Naturgy Energy vs. Chesapeake Utilities |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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