Correlation Between Diamond Estates and APA

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

By analyzing existing cross correlation between Diamond Estates Wines and APA Corporation, you can compare the effects of market volatilities on Diamond Estates 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 Diamond Estates with a short position of APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Estates and APA.

Diversification Opportunities for Diamond Estates and APA

0.71

Correlation Coefficient

Diamond Estates  APA

Poor diversification

The 3 months correlation between Diamond and APA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Estates Wines and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Diamond Estates 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 Diamond Estates Wines 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 Diamond Estates i.e., Diamond Estates and APA go up and down completely randomly.

Pair Corralation between Diamond Estates and APA

Assuming the 90 days horizon Diamond Estates Wines is expected to under-perform the APA. In addition to that, Diamond Estates is 1.54 times more volatile than APA Corporation. It trades about -0.06 of its total potential returns per unit of risk. APA Corporation is currently generating about 0.01 per unit of volatility. If you would invest  3,427  in APA Corporation on January 19, 2024 and sell it today you would lose (201.00) from holding APA Corporation or give up 5.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.77%
Values	Daily Returns

Diamond Estates Wines  vs.  APA Corp.

Diamond Estates Wines

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Estates Wines are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Diamond Estates may actually be approaching a critical reversion point that can send shares even higher in May 2024.

APA Corporation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, APA may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Diamond Estates and APA

The main advantage of trading using opposite Diamond Estates and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Estates 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.

The idea behind Diamond Estates Wines and APA Corporation 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.