Correlation Between Occidental Petroleum and PrimeEnergy
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and PrimeEnergy 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 PrimeEnergy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and PrimeEnergy, you can compare the effects of market volatilities on Occidental Petroleum and PrimeEnergy 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 PrimeEnergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and PrimeEnergy.
Diversification Opportunities for Occidental Petroleum and PrimeEnergy
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Occidental and PrimeEnergy is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and PrimeEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PrimeEnergy 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 PrimeEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PrimeEnergy has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and PrimeEnergy go up and down completely randomly.
Pair Corralation between Occidental Petroleum and PrimeEnergy
Considering the 90-day investment horizon Occidental Petroleum is expected to under-perform the PrimeEnergy. But the stock apears to be less risky and, when comparing its historical volatility, Occidental Petroleum is 2.66 times less risky than PrimeEnergy. The stock trades about -0.01 of its potential returns per unit of risk. The PrimeEnergy is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 16,301 in PrimeEnergy on August 27, 2024 and sell it today you would earn a total of 4,089 from holding PrimeEnergy or generate 25.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Occidental Petroleum vs. PrimeEnergy
Performance |
| Timeline |
| Occidental Petroleum |
| PrimeEnergy |
Occidental Petroleum and PrimeEnergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and PrimeEnergy
The main advantage of trading using opposite Occidental Petroleum and PrimeEnergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, PrimeEnergy 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 PrimeEnergy will offset losses from the drop in PrimeEnergy's long position.| Occidental Petroleum vs. Coterra Energy | Occidental Petroleum vs. Diamondback Energy | Occidental Petroleum vs. ConocoPhillips | Occidental Petroleum vs. EOG Resources |
| PrimeEnergy vs. Epsilon Energy | PrimeEnergy vs. Crescent Energy Co | PrimeEnergy vs. Evolution Petroleum | PrimeEnergy vs. MorningStar Partners, LP |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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