Correlation Between Hess and Woodside Energy
Can any of the company-specific risk be diversified away by investing in both Hess and Woodside Energy 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 Hess and Woodside Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hess Corporation and Woodside Energy Group, you can compare the effects of market volatilities on Hess and Woodside Energy 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 Hess with a short position of Woodside Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and Woodside Energy.
Diversification Opportunities for Hess and Woodside Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hess and Woodside is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and Woodside Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside Energy Group and Hess 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 Hess Corporation are associated (or correlated) with Woodside Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Energy Group has no effect on the direction of Hess i.e., Hess and Woodside Energy go up and down completely randomly.
Pair Corralation between Hess and Woodside Energy
Considering the 90-day investment horizon Hess Corporation is expected to generate 0.95 times more return on investment than Woodside Energy. However, Hess Corporation is 1.06 times less risky than Woodside Energy. It trades about 0.09 of its potential returns per unit of risk. Woodside Energy Group is currently generating about -0.02 per unit of risk. If you would invest 13,542 in Hess Corporation on November 3, 2024 and sell it today you would earn a total of 361.00 from holding Hess Corporation or generate 2.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hess Corp. vs. Woodside Energy Group
Performance |
| Timeline |
| Hess |
| Woodside Energy Group |
Hess and Woodside Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hess and Woodside Energy
The main advantage of trading using opposite Hess and Woodside Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess position performs unexpectedly, Woodside Energy 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 Woodside Energy will offset losses from the drop in Woodside Energy's long position.The idea behind Hess Corporation and Woodside Energy Group 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.| Woodside Energy vs. EOG Resources | Woodside Energy vs. APA Corporation | Woodside Energy vs. Range Resources Corp | Woodside Energy vs. Diamondback Energy |
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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