Correlation Between EchoStar and APA

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

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

Diversification Opportunities for EchoStar and APA

0.29

Correlation Coefficient

EchoStar  APA

Modest diversification

The 3 months correlation between EchoStar and APA is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding EchoStar and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and EchoStar 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 EchoStar 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 EchoStar i.e., EchoStar and APA go up and down completely randomly.

Pair Corralation between EchoStar and APA

Given the investment horizon of 90 days EchoStar is expected to generate 2.28 times more return on investment than APA. However, EchoStar is 2.28 times more volatile than APA Corporation. It trades about 0.22 of its potential returns per unit of risk. APA Corporation is currently generating about -0.11 per unit of risk. If you would invest  1,401  in EchoStar on January 27, 2024 and sell it today you would earn a total of  201.00  from holding EchoStar or generate 14.35% return on investment over 90 days.

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

EchoStar  vs.  APA Corp.

EchoStar

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EchoStar unveiled solid returns over the last few months and may actually be approaching a breakup point.

APA Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EchoStar and APA

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

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.