Correlation Between Occidental Petroleum and Kosmos Energy
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and Kosmos 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 Kosmos 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 Kosmos Energy, you can compare the effects of market volatilities on Occidental Petroleum and Kosmos 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 Kosmos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Kosmos Energy.
Diversification Opportunities for Occidental Petroleum and Kosmos Energy
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Occidental and Kosmos is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Kosmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kosmos 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 Kosmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kosmos Energy has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Kosmos Energy go up and down completely randomly.
Pair Corralation between Occidental Petroleum and Kosmos Energy
Considering the 90-day investment horizon Occidental Petroleum is expected to generate 0.47 times more return on investment than Kosmos Energy. However, Occidental Petroleum is 2.13 times less risky than Kosmos Energy. It trades about -0.03 of its potential returns per unit of risk. Kosmos Energy is currently generating about -0.06 per unit of risk. If you would invest 5,829 in Occidental Petroleum on August 26, 2024 and sell it today you would lose (636.00) from holding Occidental Petroleum or give up 10.91% 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. Kosmos Energy
Performance |
| Timeline |
| Occidental Petroleum |
| Kosmos Energy |
Occidental Petroleum and Kosmos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and Kosmos Energy
The main advantage of trading using opposite Occidental Petroleum and Kosmos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, Kosmos 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 Kosmos Energy will offset losses from the drop in Kosmos Energy's long position.| Occidental Petroleum vs. Coterra Energy | Occidental Petroleum vs. Diamondback Energy | Occidental Petroleum vs. ConocoPhillips | Occidental Petroleum vs. EOG Resources |
| Kosmos Energy vs. Devon Energy | Kosmos Energy vs. ConocoPhillips | Kosmos Energy vs. Diamondback Energy | Kosmos Energy vs. Occidental Petroleum |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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