Correlation Between Santos and APA

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

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

Diversification Opportunities for Santos and APA

0.66

Correlation Coefficient

Santos  APA

Poor diversification

The 3 months correlation between Santos and APA is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Santos and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Santos 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 Santos 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 Santos i.e., Santos and APA go up and down completely randomly.

Pair Corralation between Santos and APA

Assuming the 90 days horizon Santos is expected to under-perform the APA. In addition to that, Santos is 3.78 times more volatile than APA Corporation. It trades about -0.02 of its total potential returns per unit of risk. APA Corporation is currently generating about -0.02 per unit of volatility. If you would invest  2,246  in APA Corporation on September 17, 2024 and sell it today you would lose (20.50) from holding APA Corporation or give up 0.91% of portfolio value over 90 days.

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

Santos  vs.  APA Corp.

Santos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santos has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company 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 Santos and APA

The main advantage of trading using opposite Santos and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Santos 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 Santos 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.