Correlation Between SandRidge Energy and APA
Can any of the company-specific risk be diversified away by investing in both SandRidge 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 SandRidge Energy and APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SandRidge Energy and APA Corporation, you can compare the effects of market volatilities on SandRidge 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 SandRidge Energy with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SandRidge Energy and APA.
Diversification Opportunities for SandRidge Energy and APA
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SandRidge and APA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and SandRidge 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 SandRidge Energy 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 SandRidge Energy i.e., SandRidge Energy and APA go up and down completely randomly.
Pair Corralation between SandRidge Energy and APA
Allowing for the 90-day total investment horizon SandRidge Energy is expected to generate 0.61 times more return on investment than APA. However, SandRidge Energy is 1.63 times less risky than APA. It trades about 0.24 of its potential returns per unit of risk. APA Corporation is currently generating about -0.05 per unit of risk. If you would invest 1,107 in SandRidge Energy on August 27, 2024 and sell it today you would earn a total of 104.00 from holding SandRidge Energy or generate 9.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SandRidge Energy vs. APA Corp.
Performance |
| Timeline |
| SandRidge Energy |
| APA Corporation |
SandRidge Energy and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SandRidge Energy and APA
The main advantage of trading using opposite SandRidge Energy and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge 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.| SandRidge Energy vs. Devon Energy | SandRidge Energy vs. ConocoPhillips | SandRidge Energy vs. Occidental Petroleum | SandRidge Energy 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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