Correlation Between APA and California Resources

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

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

Diversification Opportunities for APA and California Resources

0.97

Correlation Coefficient

APA  California Resources

Almost no diversification

The 3 months correlation between APA and California is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and California Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Resources Corp 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 California Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Resources Corp has no effect on the direction of APA i.e., APA and California Resources go up and down completely randomly.

Pair Corralation between APA and California Resources

Considering the 90-day investment horizon APA is expected to generate 1.16 times less return on investment than California Resources. In addition to that, APA is 1.12 times more volatile than California Resources Corp. It trades about 0.27 of its total potential returns per unit of risk. California Resources Corp is currently generating about 0.35 per unit of volatility. If you would invest  3,439  in California Resources Corp on February 11, 2025 and sell it today you would earn a total of  767.00  from holding California Resources Corp or generate 22.3% return on investment over 90 days.

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

APA Corp.  vs.  California Resources Corp

APA Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days APA Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

California Resources Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days California Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with APA and California Resources

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

The idea behind APA Corporation and California Resources Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.