Correlation Between Japan Petroleum and APA

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

By analyzing existing cross correlation between Japan Petroleum Exploration and APA Corporation, you can compare the effects of market volatilities on Japan Petroleum and APA 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 Japan Petroleum with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Petroleum and APA.

Diversification Opportunities for Japan Petroleum and APA

-0.36

Correlation Coefficient

Japan Petroleum  APA

Very good diversification

The 3 months correlation between Japan and APA is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Japan Petroleum Exploration and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Japan Petroleum 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 Japan Petroleum Exploration are associated (or correlated) with APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Japan Petroleum i.e., Japan Petroleum and APA go up and down completely randomly.

Pair Corralation between Japan Petroleum and APA

If you would invest  3,044  in Japan Petroleum Exploration on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Japan Petroleum Exploration or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Japan Petroleum Exploration  vs.  APA Corp.

Japan Petroleum Expl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Petroleum Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Japan Petroleum and APA

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

The idea behind Japan Petroleum Exploration and APA Corporation 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.