Correlation Between APA and Vitesse Energy

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

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

Diversification Opportunities for APA and Vitesse Energy

-0.58

Correlation Coefficient

APA  Vitesse Energy

Excellent diversification

The 3 months correlation between APA and Vitesse is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Vitesse Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitesse Energy 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 Vitesse Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitesse Energy has no effect on the direction of APA i.e., APA and Vitesse Energy go up and down completely randomly.

Pair Corralation between APA and Vitesse Energy

Considering the 90-day investment horizon APA Corporation is expected to under-perform the Vitesse Energy. In addition to that, APA is 1.95 times more volatile than Vitesse Energy. It trades about -0.12 of its total potential returns per unit of risk. Vitesse Energy is currently generating about 0.15 per unit of volatility. If you would invest  2,532  in Vitesse Energy on September 13, 2024 and sell it today you would earn a total of  214.00  from holding Vitesse Energy or generate 8.45% 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.  Vitesse Energy

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 somewhat strong basic indicators, APA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Vitesse Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vitesse Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vitesse Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APA and Vitesse Energy

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

The idea behind APA Corporation and Vitesse Energy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.