Correlation Between APA and VNET Group

Can any of the company-specific risk be diversified away by investing in both APA and VNET Group 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 VNET Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between APA Corporation and VNET Group DRC, you can compare the effects of market volatilities on APA and VNET Group 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 VNET Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of APA and VNET Group.

Diversification Opportunities for APA and VNET Group

0.42

Correlation Coefficient

APA  VNET Group

Very weak diversification

The 3 months correlation between APA and VNET is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and VNET Group DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VNET Group DRC 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 VNET Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VNET Group DRC has no effect on the direction of APA i.e., APA and VNET Group go up and down completely randomly.

Pair Corralation between APA and VNET Group

Considering the 90-day investment horizon APA Corporation is expected to under-perform the VNET Group. But the stock apears to be less risky and, when comparing its historical volatility, APA Corporation is 3.29 times less risky than VNET Group. The stock trades about -0.05 of its potential returns per unit of risk. The VNET Group DRC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  163.00  in VNET Group DRC on January 26, 2024 and sell it today you would lose (5.00) from holding VNET Group DRC or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

APA Corp.  vs.  VNET Group DRC

APA Corporation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, APA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

VNET Group DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VNET Group DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with APA and VNET Group

The main advantage of trading using opposite APA and VNET Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA position performs unexpectedly, VNET Group 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 VNET Group will offset losses from the drop in VNET Group's long position.

The idea behind APA Corporation and VNET Group DRC 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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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.