Correlation Between SVB Financial and APA

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

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

Diversification Opportunities for SVB Financial and APA

0.0

Correlation Coefficient

SVB Financial  APA

Pay attention - limited upside

The 3 months correlation between SVB and APA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SVB Financial Group and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and SVB Financial 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 SVB Financial 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 Corporation has no effect on the direction of SVB Financial i.e., SVB Financial and APA go up and down completely randomly.

Pair Corralation between SVB Financial and APA

Assuming the 90 days trading horizon SVB Financial Group is expected to under-perform the APA. But the stock apears to be less risky and, when comparing its historical volatility, SVB Financial Group is 1.12 times less risky than APA. The stock trades about -0.08 of its potential returns per unit of risk. The APA Corporation is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  20,697  in APA Corporation on August 27, 2024 and sell it today you would lose (7,567) from holding APA Corporation or give up 36.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	70.07%
Values	Daily Returns

SVB Financial Group  vs.  APA Corp.

SVB Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SVB Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, SVB Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

APA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APA Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SVB Financial and APA

The main advantage of trading using opposite SVB Financial and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SVB Financial 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.

The idea behind SVB Financial Group and APA Corporation 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.