Correlation Between APA and Northern Oil

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

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

Diversification Opportunities for APA and Northern Oil

-0.31

Correlation Coefficient

APA  Northern Oil

Very good diversification

The 3 months correlation between APA and Northern is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Northern Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Oil Gas 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 Northern Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Oil Gas has no effect on the direction of APA i.e., APA and Northern Oil go up and down completely randomly.

Pair Corralation between APA and Northern Oil

Considering the 90-day investment horizon APA Corporation is expected to generate 1.03 times more return on investment than Northern Oil. However, APA is 1.03 times more volatile than Northern Oil Gas. It trades about 0.08 of its potential returns per unit of risk. Northern Oil Gas is currently generating about -0.02 per unit of risk. If you would invest  2,344  in APA Corporation on July 6, 2025 and sell it today you would earn a total of  110.00  from holding APA Corporation or generate 4.69% return on investment over 90 days.

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

APA Corp.  vs.  Northern Oil Gas

APA Corporation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, APA sustained solid returns over the last few months and may actually be approaching a breakup point.

Northern Oil Gas

Risk-Adjusted Performance

Weakest

Over the last 90 days Northern Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with APA and Northern Oil

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

The idea behind APA Corporation and Northern Oil Gas 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.