Correlation Between Hess and APA
Can any of the company-specific risk be diversified away by investing in both Hess 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 Hess and APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hess Corporation and APA Corporation, you can compare the effects of market volatilities on Hess 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 Hess with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and APA.
Diversification Opportunities for Hess and APA
Poor diversification
The 3 months correlation between Hess and APA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Hess 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 Hess Corporation 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 Hess i.e., Hess and APA go up and down completely randomly.
Pair Corralation between Hess and APA
Considering the 90-day investment horizon Hess Corporation is expected to generate 0.84 times more return on investment than APA. However, Hess Corporation is 1.19 times less risky than APA. It trades about -0.02 of its potential returns per unit of risk. APA Corporation is currently generating about -0.09 per unit of risk. If you would invest 16,034 in Hess Corporation on January 20, 2024 and sell it today you would lose (856.00) from holding Hess Corporation or give up 5.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hess Corp. vs. APA Corp.
Performance |
| Timeline |
| Hess |
| APA Corporation |
Hess and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hess and APA
The main advantage of trading using opposite Hess and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess 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.| Hess vs. Diamondback Energy | Hess vs. ConocoPhillips | Hess vs. Pioneer Natural Resources | Hess vs. APA Corporation |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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