Correlation Between Woodside Energy and APA

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

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

Diversification Opportunities for Woodside Energy and APA

0.82

Correlation Coefficient

Woodside Energy  APA

Very poor diversification

The 3 months correlation between Woodside and APA is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Energy Group and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Woodside Energy 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 Woodside Energy Group 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 Woodside Energy i.e., Woodside Energy and APA go up and down completely randomly.

Pair Corralation between Woodside Energy and APA

Considering the 90-day investment horizon Woodside Energy Group is expected to under-perform the APA. In addition to that, Woodside Energy is 1.25 times more volatile than APA Corporation. It trades about -0.09 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	Strong
Accuracy	100.0%
Values	Daily Returns

Woodside Energy Group  vs.  APA Corp.

Woodside Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woodside Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Woodside Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 Woodside Energy and APA

The main advantage of trading using opposite Woodside Energy and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodside Energy 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 Woodside Energy Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.