Correlation Between Occidental Petroleum and APA
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and APA 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 APA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and APA Corporation, you can compare the effects of market volatilities on Occidental Petroleum and APA 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 APA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and APA.
Diversification Opportunities for Occidental Petroleum and APA
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Occidental and APA is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation 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 APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and APA go up and down completely randomly.
Pair Corralation between Occidental Petroleum and APA
Assuming the 90 days trading horizon Occidental Petroleum is expected to under-perform the APA. In addition to that, Occidental Petroleum is 15.29 times more volatile than APA Corporation. It trades about -0.27 of its total potential returns per unit of risk. APA Corporation is currently generating about 0.21 per unit of volatility. If you would invest 14,971 in APA Corporation on November 18, 2024 and sell it today you would earn a total of 104.00 from holding APA Corporation or generate 0.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Occidental Petroleum vs. APA Corp.
Performance |
| Timeline |
| Occidental Petroleum |
| APA Corporation |
Occidental Petroleum and APA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and APA
The main advantage of trading using opposite Occidental Petroleum and APA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, APA 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 APA will offset losses from the drop in APA's long position.The idea behind Occidental Petroleum and APA Corporation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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