Correlation Between Prairie Provident and APA

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

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

Diversification Opportunities for Prairie Provident and APA

0.68

Correlation Coefficient

Prairie Provident  APA

Poor diversification

The 3 months correlation between Prairie and APA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Prairie Provident Resources and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Prairie Provident 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 Prairie Provident Resources 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 Prairie Provident i.e., Prairie Provident and APA go up and down completely randomly.

Pair Corralation between Prairie Provident and APA

Assuming the 90 days horizon Prairie Provident Resources is expected to generate 6.49 times more return on investment than APA. However, Prairie Provident is 6.49 times more volatile than APA Corporation. It trades about 0.13 of its potential returns per unit of risk. APA Corporation is currently generating about -0.02 per unit of risk. If you would invest  1.79  in Prairie Provident Resources on September 17, 2024 and sell it today you would earn a total of  0.31  from holding Prairie Provident Resources or generate 17.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Prairie Provident Resources  vs.  APA Corp.

Prairie Provident

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prairie Provident Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Prairie Provident 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 Prairie Provident and APA

The main advantage of trading using opposite Prairie Provident and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prairie Provident 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 Prairie Provident Resources 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.