Correlation Between APA and Concho Resources

Can any of the company-specific risk be diversified away by investing in both APA and Concho Resources 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 APA and Concho Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between APA Corporation and Concho Resources, you can compare the effects of market volatilities on APA and Concho Resources 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 APA with a short position of Concho Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Concho Resources.

Diversification Opportunities for APA and Concho Resources

0.0

Correlation Coefficient

APA  Concho Resources

Pay attention - limited upside

The 3 months correlation between APA and Concho is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Concho Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concho Resources and APA 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 APA Corporation are associated (or correlated) with Concho Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concho Resources has no effect on the direction of APA i.e., APA and Concho Resources go up and down completely randomly.

Pair Corralation between APA and Concho Resources

If you would invest  3,074  in APA Corporation on February 18, 2024 and sell it today you would earn a total of  14.00  from holding APA Corporation or generate 0.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

APA Corp.  vs.  Concho Resources

APA Corporation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, APA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Concho Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Concho Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Concho Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with APA and Concho Resources

The main advantage of trading using opposite APA and Concho Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Concho Resources 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 Concho Resources will offset losses from the drop in Concho Resources' long position.

The idea behind APA Corporation and Concho Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .