Correlation Between Occidental Petroleum and Woodside Energy
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum 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 Occidental Petroleum and Woodside Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and Woodside Energy Group, you can compare the effects of market volatilities on Occidental Petroleum 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 Occidental Petroleum with a short position of Woodside Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Woodside Energy.
Diversification Opportunities for Occidental Petroleum and Woodside Energy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Occidental and Woodside is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum 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 Occidental Petroleum 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 Occidental Petroleum 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 Occidental Petroleum i.e., Occidental Petroleum and Woodside Energy go up and down completely randomly.
Pair Corralation between Occidental Petroleum and Woodside Energy
Assuming the 90 days horizon Occidental Petroleum is expected to under-perform the Woodside Energy. But the stock apears to be less risky and, when comparing its historical volatility, Occidental Petroleum is 1.03 times less risky than Woodside Energy. The stock trades about -0.03 of its potential returns per unit of risk. The Woodside Energy Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,530 in Woodside Energy Group on November 2, 2024 and sell it today you would lose (72.00) from holding Woodside Energy Group or give up 4.71% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Occidental Petroleum vs. Woodside Energy Group
Performance |
Timeline |
Occidental Petroleum |
Woodside Energy Group |
Occidental Petroleum and Woodside Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Occidental Petroleum and Woodside Energy
The main advantage of trading using opposite Occidental Petroleum and Woodside Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum 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.Occidental Petroleum vs. Highlight Communications AG | Occidental Petroleum vs. Spirent Communications plc | Occidental Petroleum vs. NURAN WIRELESS INC | Occidental Petroleum vs. GEELY AUTOMOBILE |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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