Correlation Between Snam SpA and APA

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

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

Diversification Opportunities for Snam SpA and APA

0.76

Correlation Coefficient

Snam SpA  APA

Poor diversification

The 3 months correlation between Snam and APA is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Snam SpA ADR and APA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Group and Snam SpA 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 Snam SpA ADR 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 Group has no effect on the direction of Snam SpA i.e., Snam SpA and APA go up and down completely randomly.

Pair Corralation between Snam SpA and APA

Assuming the 90 days horizon Snam SpA ADR is expected to under-perform the APA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Snam SpA ADR is 4.75 times less risky than APA. The pink sheet trades about -0.14 of its potential returns per unit of risk. The APA Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  476.00  in APA Group on September 13, 2024 and sell it today you would lose (20.00) from holding APA Group or give up 4.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Snam SpA ADR  vs.  APA Group

Snam SpA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snam SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of 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.

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 forward-looking indicators, APA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Snam SpA and APA

The main advantage of trading using opposite Snam SpA and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snam SpA 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 Snam SpA ADR and APA Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.