Correlation Between APA and Expand Energy
Can any of the company-specific risk be diversified away by investing in both APA and Expand Energy 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 Expand Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APA Corporation and Expand Energy, you can compare the effects of market volatilities on APA and Expand Energy 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 Expand Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and Expand Energy.
Diversification Opportunities for APA and Expand Energy
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between APA and Expand is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy 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 Corporation are associated (or correlated) with Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of APA i.e., APA and Expand Energy go up and down completely randomly.
Pair Corralation between APA and Expand Energy
Considering the 90-day investment horizon APA Corporation is expected to generate 2.31 times more return on investment than Expand Energy. However, APA is 2.31 times more volatile than Expand Energy. It trades about 0.11 of its potential returns per unit of risk. Expand Energy is currently generating about 0.1 per unit of risk. If you would invest 1,494 in APA Corporation on April 4, 2025 and sell it today you would earn a total of 400.00 from holding APA Corporation or generate 26.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APA Corp. vs. Expand Energy
Performance |
| Timeline |
| APA Corporation |
| Expand Energy |
APA and Expand Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APA and Expand Energy
The main advantage of trading using opposite APA and Expand Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Expand Energy 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 Expand Energy will offset losses from the drop in Expand Energy's long position.The idea behind APA Corporation and Expand Energy 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.| Expand Energy vs. Luxfer Holdings PLC | Expand Energy vs. Plexus Corp | Expand Energy vs. Kulicke and Soffa | Expand Energy vs. NetEase |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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