Correlation Between APA and Iwatani

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

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

Diversification Opportunities for APA and Iwatani

0.59

Correlation Coefficient

APA  Iwatani

Very weak diversification

The 3 months correlation between APA and Iwatani is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding APA Group and Iwatani in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iwatani 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 Group are associated (or correlated) with Iwatani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iwatani has no effect on the direction of APA i.e., APA and Iwatani go up and down completely randomly.

Pair Corralation between APA and Iwatani

Assuming the 90 days horizon APA Group is expected to generate 1.4 times more return on investment than Iwatani. However, APA is 1.4 times more volatile than Iwatani. It trades about 0.0 of its potential returns per unit of risk. Iwatani is currently generating about -0.23 per unit of risk. If you would invest  426.00  in APA Group on September 19, 2024 and sell it today you would lose (2.00) from holding APA Group or give up 0.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

APA Group  vs.  Iwatani

APA Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Iwatani

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iwatani has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with APA and Iwatani

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

The idea behind APA Group and Iwatani 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.