Correlation Between APA and Dave

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

Diversification Opportunities for APA and Dave

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between APA and Dave is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Dave Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Inc 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 Dave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Inc has no effect on the direction of APA i.e., APA and Dave go up and down completely randomly.

Pair Corralation between APA and Dave

Considering the 90-day investment horizon APA Corporation is expected to generate 0.53 times more return on investment than Dave. However, APA Corporation is 1.89 times less risky than Dave. It trades about 0.07 of its potential returns per unit of risk. Dave Inc is currently generating about -0.09 per unit of risk. If you would invest  1,677  in APA Corporation on November 1, 2022 and sell it today you would earn a total of  2,809  from holding APA Corporation or generate 167.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy87.32%
ValuesDaily Returns

APA Corp.  vs.  Dave Inc

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

APA Price Channel

Dave Inc 
Dave Performance
0 of 100
Over the last 90 days Dave Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Dave is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Dave Price Channel

APA and Dave Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with APA and Dave

The main advantage of trading using opposite APA and Dave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, Dave 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 Dave will offset losses from the drop in Dave's long position.
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The idea behind APA Corporation and Dave Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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