Correlation Between Banco BTG and Occidental Petroleum
Can any of the company-specific risk be diversified away by investing in both Banco BTG and Occidental Petroleum 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 Banco BTG and Occidental Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco BTG Pactual and Occidental Petroleum, you can compare the effects of market volatilities on Banco BTG and Occidental Petroleum 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 Banco BTG with a short position of Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco BTG and Occidental Petroleum.
Diversification Opportunities for Banco BTG and Occidental Petroleum
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Banco and Occidental is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and Banco BTG 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 Banco BTG Pactual are associated (or correlated) with Occidental Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Banco BTG i.e., Banco BTG and Occidental Petroleum go up and down completely randomly.
Pair Corralation between Banco BTG and Occidental Petroleum
Assuming the 90 days trading horizon Banco BTG Pactual is expected to under-perform the Occidental Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Banco BTG Pactual is 1.01 times less risky than Occidental Petroleum. The stock trades about -0.01 of its potential returns per unit of risk. The Occidental Petroleum is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,840 in Occidental Petroleum on August 28, 2024 and sell it today you would earn a total of 48.00 from holding Occidental Petroleum or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco BTG Pactual vs. Occidental Petroleum
Performance |
| Timeline |
| Banco BTG Pactual |
| Occidental Petroleum |
Banco BTG and Occidental Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco BTG and Occidental Petroleum
The main advantage of trading using opposite Banco BTG and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco BTG position performs unexpectedly, Occidental Petroleum 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 Occidental Petroleum will offset losses from the drop in Occidental Petroleum's long position.The idea behind Banco BTG Pactual and Occidental Petroleum 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.| Occidental Petroleum vs. MAHLE Metal Leve | Occidental Petroleum vs. CVS Health | Occidental Petroleum vs. Taiwan Semiconductor Manufacturing | Occidental Petroleum vs. Broadcom |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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