Correlation Between Occidental Petroleum and Veren
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and Veren 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 Veren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and Veren Inc, you can compare the effects of market volatilities on Occidental Petroleum and Veren 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 Veren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Veren.
Diversification Opportunities for Occidental Petroleum and Veren
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Occidental and Veren is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Veren Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veren Inc 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 Veren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veren Inc has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Veren go up and down completely randomly.
Pair Corralation between Occidental Petroleum and Veren
Considering the 90-day investment horizon Occidental Petroleum is expected to under-perform the Veren. But the stock apears to be less risky and, when comparing its historical volatility, Occidental Petroleum is 1.54 times less risky than Veren. The stock trades about -0.02 of its potential returns per unit of risk. The Veren Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 646.00 in Veren Inc on August 31, 2024 and sell it today you would lose (116.00) from holding Veren Inc or give up 17.96% 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. Veren Inc
Performance |
| Timeline |
| Occidental Petroleum |
| Veren Inc |
Occidental Petroleum and Veren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and Veren
The main advantage of trading using opposite Occidental Petroleum and Veren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, Veren 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 Veren will offset losses from the drop in Veren's long position.| Occidental Petroleum vs. Coterra Energy | Occidental Petroleum vs. Diamondback Energy | Occidental Petroleum vs. ConocoPhillips | Occidental Petroleum vs. EOG Resources |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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