Correlation Between Paramount Global and APA

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

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

Diversification Opportunities for Paramount Global and APA

0.46

Correlation Coefficient

Paramount Global  APA

Very weak diversification

The 3 months correlation between Paramount and APA is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Global Class and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Paramount Global 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 Paramount Global Class 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 Paramount Global i.e., Paramount Global and APA go up and down completely randomly.

Pair Corralation between Paramount Global and APA

Assuming the 90 days horizon Paramount Global Class is expected to generate 1.92 times more return on investment than APA. However, Paramount Global is 1.92 times more volatile than APA Corporation. It trades about 0.05 of its potential returns per unit of risk. APA Corporation is currently generating about -0.04 per unit of risk. If you would invest  1,828  in Paramount Global Class on January 24, 2024 and sell it today you would earn a total of  431.00  from holding Paramount Global Class or generate 23.58% return on investment over 90 days.

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

Paramount Global Class  vs.  APA Corp.

Paramount Global Class

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Global Class are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Paramount Global sustained solid returns over the last few months and may actually be approaching a breakup point.

APA Corporation

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 3 (%) 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.

Pair Trading with Paramount Global and APA

The main advantage of trading using opposite Paramount Global and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Global 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 Paramount Global Class 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.