Correlation Between Occidental Petroleum and Japan Petroleum
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and Japan 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 Occidental Petroleum and Japan Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and Japan Petroleum Exploration, you can compare the effects of market volatilities on Occidental Petroleum and Japan 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 Occidental Petroleum with a short position of Japan Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Japan Petroleum.
Diversification Opportunities for Occidental Petroleum and Japan Petroleum
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Occidental and Japan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Japan Petroleum Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Petroleum Expl 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 Japan Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Petroleum Expl has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Japan Petroleum go up and down completely randomly.
Pair Corralation between Occidental Petroleum and Japan Petroleum
Assuming the 90 days trading horizon Occidental Petroleum is expected to generate 0.98 times more return on investment than Japan Petroleum. However, Occidental Petroleum is 1.03 times less risky than Japan Petroleum. It trades about 0.11 of its potential returns per unit of risk. Japan Petroleum Exploration is currently generating about -0.05 per unit of risk. If you would invest 4,598 in Occidental Petroleum on September 1, 2024 and sell it today you would earn a total of 201.00 from holding Occidental Petroleum or generate 4.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Occidental Petroleum vs. Japan Petroleum Exploration
Performance |
| Timeline |
| Occidental Petroleum |
| Japan Petroleum Expl |
Occidental Petroleum and Japan Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and Japan Petroleum
The main advantage of trading using opposite Occidental Petroleum and Japan Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, Japan 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 Japan Petroleum will offset losses from the drop in Japan Petroleum's long position.| Occidental Petroleum vs. PennantPark Investment | Occidental Petroleum vs. CapitaLand Investment Limited | Occidental Petroleum vs. SOFI TECHNOLOGIES | Occidental Petroleum vs. Virtus Investment Partners |
| Japan Petroleum vs. EOG Resources | Japan Petroleum vs. Canadian Natural Resources | Japan Petroleum vs. Occidental Petroleum | Japan Petroleum vs. WOODSIDE ENE SPADR |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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