Correlation Between Occidental Petroleum and Petro Rio
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and Petro Rio 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 Petro Rio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and Petro Rio SA, you can compare the effects of market volatilities on Occidental Petroleum and Petro Rio 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 Petro Rio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Petro Rio.
Diversification Opportunities for Occidental Petroleum and Petro Rio
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Occidental and Petro is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio SA 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 Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Petro Rio go up and down completely randomly.
Pair Corralation between Occidental Petroleum and Petro Rio
Assuming the 90 days trading horizon Occidental Petroleum is expected to under-perform the Petro Rio. But the stock apears to be less risky and, when comparing its historical volatility, Occidental Petroleum is 1.15 times less risky than Petro Rio. The stock trades about 0.0 of its potential returns per unit of risk. The Petro Rio SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,596 in Petro Rio SA on August 24, 2024 and sell it today you would earn a total of 317.00 from holding Petro Rio SA or generate 8.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Occidental Petroleum vs. Petro Rio SA
Performance |
| Timeline |
| Occidental Petroleum |
| Petro Rio SA |
Occidental Petroleum and Petro Rio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and Petro Rio
The main advantage of trading using opposite Occidental Petroleum and Petro Rio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, Petro Rio 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 Petro Rio will offset losses from the drop in Petro Rio's long position.| Occidental Petroleum vs. Petro Rio SA | Occidental Petroleum vs. Banco BTG Pactual | Occidental Petroleum vs. Ambipar Participaes e | Occidental Petroleum vs. Mliuz SA |
| Petro Rio vs. Mitsubishi UFJ Financial | Petro Rio vs. Sumitomo Mitsui Financial | Petro Rio vs. Toyota Motor | Petro Rio vs. Banco Santander Chile |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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