Correlation Between Occidental Petroleum and Diversified Energy
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and Diversified 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 Diversified 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 Diversified Energy, you can compare the effects of market volatilities on Occidental Petroleum and Diversified 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 Diversified Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Diversified Energy.
Diversification Opportunities for Occidental Petroleum and Diversified Energy
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Occidental and Diversified is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Diversified Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Energy 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 Diversified Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Energy has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Diversified Energy go up and down completely randomly.
Pair Corralation between Occidental Petroleum and Diversified Energy
Considering the 90-day investment horizon Occidental Petroleum is expected to generate 11.98 times less return on investment than Diversified Energy. But when comparing it to its historical volatility, Occidental Petroleum is 2.41 times less risky than Diversified Energy. It trades about 0.11 of its potential returns per unit of risk. Diversified Energy is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest 1,168 in Diversified Energy on August 27, 2024 and sell it today you would earn a total of 424.00 from holding Diversified Energy or generate 36.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Occidental Petroleum vs. Diversified Energy
Performance |
| Timeline |
| Occidental Petroleum |
| Diversified Energy |
Occidental Petroleum and Diversified Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and Diversified Energy
The main advantage of trading using opposite Occidental Petroleum and Diversified Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, Diversified 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 Diversified Energy will offset losses from the drop in Diversified Energy's long position.| Occidental Petroleum vs. Coterra Energy | Occidental Petroleum vs. Diamondback Energy | Occidental Petroleum vs. ConocoPhillips | Occidental Petroleum vs. EOG Resources |
| Diversified Energy vs. Devon Energy | Diversified Energy vs. ConocoPhillips | Diversified Energy vs. Occidental Petroleum | Diversified Energy vs. Permian 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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