Correlation Between OPAL Fuels and APA
Can any of the company-specific risk be diversified away by investing in both OPAL Fuels 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 OPAL Fuels and APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OPAL Fuels and APA Group, you can compare the effects of market volatilities on OPAL Fuels 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 OPAL Fuels with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of OPAL Fuels and APA.
Diversification Opportunities for OPAL Fuels and APA
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between OPAL and APA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding OPAL Fuels and APA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Group and OPAL Fuels 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 OPAL Fuels 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 OPAL Fuels i.e., OPAL Fuels and APA go up and down completely randomly.
Pair Corralation between OPAL Fuels and APA
Given the investment horizon of 90 days OPAL Fuels is expected to under-perform the APA. But the stock apears to be less risky and, when comparing its historical volatility, OPAL Fuels is 3.68 times less risky than APA. The stock trades about -0.28 of its potential returns per unit of risk. The APA Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 400.00 in APA Group on November 1, 2024 and sell it today you would earn a total of 20.00 from holding APA Group or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
OPAL Fuels vs. APA Group
Performance |
| Timeline |
| OPAL Fuels |
| APA Group |
OPAL Fuels and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OPAL Fuels and APA
The main advantage of trading using opposite OPAL Fuels and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OPAL Fuels 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.| OPAL Fuels vs. Northwest Natural Gas | OPAL Fuels vs. Chesapeake Utilities | OPAL Fuels vs. One Gas | OPAL Fuels vs. NewJersey 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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