Correlation Between PetroShale and APA
Can any of the company-specific risk be diversified away by investing in both PetroShale 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 PetroShale and APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetroShale and APA Corporation, you can compare the effects of market volatilities on PetroShale 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 PetroShale with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroShale and APA.
Diversification Opportunities for PetroShale and APA
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PetroShale and APA is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and PetroShale 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 PetroShale 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 PetroShale i.e., PetroShale and APA go up and down completely randomly.
Pair Corralation between PetroShale and APA
Assuming the 90 days horizon PetroShale is expected to under-perform the APA. But the otc stock apears to be less risky and, when comparing its historical volatility, PetroShale is 2.06 times less risky than APA. The otc stock trades about -0.21 of its potential returns per unit of risk. The APA Corporation is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 2,360 in APA Corporation on September 1, 2024 and sell it today you would lose (95.00) from holding APA Corporation or give up 4.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PetroShale vs. APA Corp.
Performance |
| Timeline |
| PetroShale |
| APA Corporation |
PetroShale and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroShale and APA
The main advantage of trading using opposite PetroShale and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroShale 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.| PetroShale vs. Dno ASA | PetroShale vs. Horizon Oil Limited | PetroShale vs. Enwell Energy plc | PetroShale vs. Tullow Oil plc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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