Correlation Between APA and Antero Resources

Can any of the company-specific risk be diversified away by investing in both APA and Antero 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 Antero 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 Antero Resources Corp, you can compare the effects of market volatilities on APA and Antero 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 Antero Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Antero Resources.

Diversification Opportunities for APA and Antero Resources

0.66

Correlation Coefficient

APA  Antero Resources

Poor diversification

The 3 months correlation between APA and Antero is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Antero Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Resources Corp 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 Antero Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Resources Corp has no effect on the direction of APA i.e., APA and Antero Resources go up and down completely randomly.

Pair Corralation between APA and Antero Resources

Considering the 90-day investment horizon APA is expected to generate 3.06 times less return on investment than Antero Resources. But when comparing it to its historical volatility, APA Corporation is 1.04 times less risky than Antero Resources. It trades about 0.13 of its potential returns per unit of risk. Antero Resources Corp is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  2,546  in Antero Resources Corp on January 29, 2024 and sell it today you would earn a total of  834.00  from holding Antero Resources Corp or generate 32.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

APA Corp.  vs.  Antero Resources Corp

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.

Antero Resources Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Resources Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Antero Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APA and Antero Resources

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

The idea behind APA Corporation and Antero Resources Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.