Correlation Between APA and Nextdecade Corp

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

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

Diversification Opportunities for APA and Nextdecade Corp

-0.77

Correlation Coefficient

APA  Nextdecade Corp

Pay attention - limited upside

The 3 months correlation between APA and Nextdecade is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Nextdecade Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextdecade 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 Nextdecade Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextdecade Corp has no effect on the direction of APA i.e., APA and Nextdecade Corp go up and down completely randomly.

Pair Corralation between APA and Nextdecade Corp

Considering the 90-day investment horizon APA Corporation is expected to under-perform the Nextdecade Corp. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.31 times less risky than Nextdecade Corp. The stock trades about -0.07 of its potential returns per unit of risk. The Nextdecade Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  478.00  in Nextdecade Corp on September 5, 2024 and sell it today you would earn a total of  234.00  from holding Nextdecade Corp or generate 48.95% return on investment over 90 days.

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

APA Corp.  vs.  Nextdecade Corp

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nextdecade Corp

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nextdecade Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nextdecade Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APA and Nextdecade Corp

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

The idea behind APA Corporation and Nextdecade 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.