Correlation Between Occidental Petroleum and APA
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and APA 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 APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and APA Corporation, you can compare the effects of market volatilities on Occidental Petroleum and APA 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 APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and APA.
Diversification Opportunities for Occidental Petroleum and APA
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Occidental and APA is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation 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 APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and APA go up and down completely randomly.
Pair Corralation between Occidental Petroleum and APA
Considering the 90-day investment horizon Occidental Petroleum is expected to generate 0.6 times more return on investment than APA. However, Occidental Petroleum is 1.67 times less risky than APA. It trades about -0.04 of its potential returns per unit of risk. APA Corporation is currently generating about -0.05 per unit of risk. If you would invest 5,691 in Occidental Petroleum on August 28, 2024 and sell it today you would lose (647.00) from holding Occidental Petroleum or give up 11.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Occidental Petroleum vs. APA Corp.
Performance |
| Timeline |
| Occidental Petroleum |
| APA Corporation |
Occidental Petroleum and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and APA
The main advantage of trading using opposite Occidental Petroleum and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, APA 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 APA will offset losses from the drop in APA's long position.| Occidental Petroleum vs. Coterra Energy | Occidental Petroleum vs. Diamondback Energy | Occidental Petroleum vs. ConocoPhillips | Occidental Petroleum vs. EOG Resources |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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