Correlation Between APA and Anadarko Petroleum

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

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

Diversification Opportunities for APA and Anadarko Petroleum

0.0

Correlation Coefficient

APA  Anadarko Petroleum

Pay attention - limited upside

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

Pair Corralation between APA and Anadarko Petroleum

If you would invest (100.00) in Anadarko Petroleum on January 29, 2024 and sell it today you would earn a total of  100.00  from holding Anadarko Petroleum or generate -100.0% return on investment over 90 days.

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

APA Corp.  vs.  Anadarko Petroleum

APA Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Anadarko Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anadarko Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Anadarko Petroleum is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with APA and Anadarko Petroleum

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

The idea behind APA Corporation and Anadarko Petroleum 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.