Correlation Between APA and EchoStar

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

Diversification Opportunities for APA and EchoStar

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between APA and EchoStar is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and EchoStar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EchoStar 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 EchoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EchoStar has no effect on the direction of APA i.e., APA and EchoStar go up and down completely randomly.

Pair Corralation between APA and EchoStar

Considering the 90-day investment horizon APA Corporation is expected to generate 0.41 times more return on investment than EchoStar. However, APA Corporation is 2.44 times less risky than EchoStar. It trades about 0.27 of its potential returns per unit of risk. EchoStar is currently generating about 0.09 per unit of risk. If you would invest  3,020  in APA Corporation on December 29, 2023 and sell it today you would earn a total of  351.00  from holding APA Corporation or generate 11.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

APA Corp.  vs.  EchoStar

 Performance 
       Timeline  
APA Corporation 

Risk-Adjusted Performance

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Very Weak
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.
EchoStar 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days EchoStar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

APA and EchoStar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with APA and EchoStar

The main advantage of trading using opposite APA and EchoStar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, EchoStar 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 EchoStar will offset losses from the drop in EchoStar's long position.
The idea behind APA Corporation and EchoStar 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.
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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