Correlation Between Occidental Petroleum and CVS Health
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and CVS Health 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 CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and CVS Health, you can compare the effects of market volatilities on Occidental Petroleum and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and CVS Health.
Diversification Opportunities for Occidental Petroleum and CVS Health
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Occidental and CVS is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and CVS Health go up and down completely randomly.
Pair Corralation between Occidental Petroleum and CVS Health
Assuming the 90 days trading horizon Occidental Petroleum is expected to generate 0.37 times more return on investment than CVS Health. However, Occidental Petroleum is 2.72 times less risky than CVS Health. It trades about 0.14 of its potential returns per unit of risk. CVS Health is currently generating about 0.03 per unit of risk. If you would invest 4,840 in Occidental Petroleum on August 27, 2024 and sell it today you would earn a total of 196.00 from holding Occidental Petroleum or generate 4.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Occidental Petroleum vs. CVS Health
Performance |
| Timeline |
| Occidental Petroleum |
| CVS Health |
Occidental Petroleum and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and CVS Health
The main advantage of trading using opposite Occidental Petroleum and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Occidental Petroleum vs. MAHLE Metal Leve | Occidental Petroleum vs. CVS Health | Occidental Petroleum vs. Taiwan Semiconductor Manufacturing | Occidental Petroleum vs. Broadcom |
| CVS Health vs. Zoom Video Communications | CVS Health vs. Bread Financial Holdings | CVS Health vs. salesforce inc | CVS Health vs. Cognizant Technology Solutions |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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