Correlation Between Occidental Petroleum and Santos
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and Santos 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 Santos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and Santos, you can compare the effects of market volatilities on Occidental Petroleum and Santos 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 Santos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Santos.
Diversification Opportunities for Occidental Petroleum and Santos
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Occidental and Santos is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Santos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos 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 Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Santos go up and down completely randomly.
Pair Corralation between Occidental Petroleum and Santos
Considering the 90-day investment horizon Occidental Petroleum is expected to generate 2.24 times less return on investment than Santos. But when comparing it to its historical volatility, Occidental Petroleum is 2.36 times less risky than Santos. It trades about 0.04 of its potential returns per unit of risk. Santos is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 443.00 in Santos on September 1, 2024 and sell it today you would earn a total of 7.00 from holding Santos or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Occidental Petroleum vs. Santos
Performance |
| Timeline |
| Occidental Petroleum |
| Santos |
Occidental Petroleum and Santos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and Santos
The main advantage of trading using opposite Occidental Petroleum and Santos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, Santos 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 Santos will offset losses from the drop in Santos' long position.| Occidental Petroleum vs. Coterra Energy | Occidental Petroleum vs. Diamondback Energy | Occidental Petroleum vs. ConocoPhillips | Occidental Petroleum vs. EOG Resources |
| Santos vs. Permian Resources | Santos vs. Devon Energy | Santos vs. EOG Resources | Santos vs. Coterra Energy |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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