Correlation Between APA and Imperial Petroleum

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

Diversification Opportunities for APA and Imperial Petroleum

0.81

Correlation Coefficient

APA  Imperial Petroleum

Very poor diversification

The 3 months correlation between APA and Imperial is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Imperial Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial 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 Imperial Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Petroleum has no effect on the direction of APA i.e., APA and Imperial Petroleum go up and down completely randomly.

Pair Corralation between APA and Imperial Petroleum

Considering the 90-day investment horizon APA Corporation is expected to under-perform the Imperial Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.15 times less risky than Imperial Petroleum. The stock trades about -0.02 of its potential returns per unit of risk. The Imperial Petroleum is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  173.00  in Imperial Petroleum on July 25, 2025 and sell it today you would earn a total of  336.00  from holding Imperial Petroleum or generate 194.22% return on investment over 90 days.

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

APA Corp.  vs.  Imperial Petroleum

APA Corporation

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, APA sustained solid returns over the last few months and may actually be approaching a breakup point.

Imperial Petroleum

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Petroleum are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Imperial Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APA and Imperial Petroleum

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

The idea behind APA Corporation and Imperial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.