Correlation Between Occidental Petroleum and Align Technology
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and Align Technology 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 Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and Align Technology, you can compare the effects of market volatilities on Occidental Petroleum and Align Technology 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 Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Align Technology.
Diversification Opportunities for Occidental Petroleum and Align Technology
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Occidental and Align is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology 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 Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Align Technology go up and down completely randomly.
Pair Corralation between Occidental Petroleum and Align Technology
Assuming the 90 days trading horizon Occidental Petroleum is expected to generate 2.53 times less return on investment than Align Technology. But when comparing it to its historical volatility, Occidental Petroleum is 1.18 times less risky than Align Technology. It trades about 0.03 of its potential returns per unit of risk. Align Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 27,300 in Align Technology on September 2, 2024 and sell it today you would earn a total of 7,554 from holding Align Technology or generate 27.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Occidental Petroleum vs. Align Technology
Performance |
| Timeline |
| Occidental Petroleum |
| Align Technology |
Occidental Petroleum and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and Align Technology
The main advantage of trading using opposite Occidental Petroleum and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, Align Technology 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 Align Technology will offset losses from the drop in Align Technology's long position.| Occidental Petroleum vs. Align Technology | Occidental Petroleum vs. Unity Software | Occidental Petroleum vs. Take Two Interactive Software | Occidental Petroleum vs. Bemobi Mobile Tech |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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