Correlation Between Warner Bros and APA

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

Diversification Opportunities for Warner Bros and APA

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Warner and APA is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Warner Bros Discovery and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation and Warner Bros 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 Warner Bros Discovery 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 Warner Bros i.e., Warner Bros and APA go up and down completely randomly.

Pair Corralation between Warner Bros and APA

Considering the 90-day investment horizon Warner Bros is expected to generate 13.06 times less return on investment than APA. In addition to that, Warner Bros is 1.31 times more volatile than APA Corporation. It trades about 0.02 of its total potential returns per unit of risk. APA Corporation is currently generating about 0.31 per unit of volatility. If you would invest  3,020  in APA Corporation on December 29, 2023 and sell it today you would earn a total of  418.00  from holding APA Corporation or generate 13.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Warner Bros Discovery  vs.  APA Corp.

 Performance 
       Timeline  
Warner Bros Discovery 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Warner Bros Discovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
APA Corporation 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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.

Warner Bros and APA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Warner Bros and APA

The main advantage of trading using opposite Warner Bros and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Bros 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 Warner Bros Discovery 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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