Correlation Between APA and San Juan

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

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

Diversification Opportunities for APA and San Juan

-0.4

Correlation Coefficient

APA  San Juan

Very good diversification

The 3 months correlation between APA and San is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and San Juan Basin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Juan Basin 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 San Juan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Juan Basin has no effect on the direction of APA i.e., APA and San Juan go up and down completely randomly.

Pair Corralation between APA and San Juan

Considering the 90-day investment horizon APA Corporation is expected to under-perform the San Juan. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 1.05 times less risky than San Juan. The stock trades about -0.08 of its potential returns per unit of risk. The San Juan Basin is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  322.00  in San Juan Basin on September 2, 2024 and sell it today you would earn a total of  125.00  from holding San Juan Basin or generate 38.82% return on investment over 90 days.

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

APA Corp.  vs.  San Juan Basin

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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

San Juan Basin

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with APA and San Juan

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

The idea behind APA Corporation and San Juan Basin 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.