Correlation Between Chevron Corp and Apa Corp

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Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Apa Corp 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 Chevron Corp and Apa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Apa Corp, you can compare the effects of market volatilities on Chevron Corp and Apa Corp 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 Chevron Corp with a short position of Apa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Apa Corp.

Diversification Opportunities for Chevron Corp and Apa Corp

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Chevron and Apa Corp is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Apa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apa Corp and Chevron Corp 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 Chevron Corp are associated (or correlated) with Apa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apa Corp has no effect on the direction of Chevron Corp i.e., Chevron Corp and Apa Corp go up and down completely randomly.

Pair Corralation between Chevron Corp and Apa Corp

Considering the 90-day investment horizon Chevron Corp is expected to generate 0.53 times more return on investment than Apa Corp. However, Chevron Corp is 1.89 times less risky than Apa Corp. It trades about -0.02 of its potential returns per unit of risk. Apa Corp is currently generating about -0.02 per unit of risk. If you would invest  14,698  in Chevron Corp on June 29, 2022 and sell it today you would lose (596.00)  from holding Chevron Corp or give up 4.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Chevron Corp  vs.  Apa Corp

 Performance (%) 
       Timeline  
Chevron Corp 
Chevron Performance
0 of 100
Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Chevron Price Channel

Apa Corp 
Apa Corp Performance
0 of 100
Over the last 90 days Apa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Apa Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Apa Corp Price Channel

Chevron Corp and Apa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chevron Corp and Apa Corp

The main advantage of trading using opposite Chevron Corp and Apa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Apa Corp 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 Corp will offset losses from the drop in Apa Corp's long position.
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The idea behind Chevron Corp and Apa Corp 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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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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